Rethinking Zombie Firms: From Volatility to Viability

摘要

The literature characterizes zombie firms as economically unviable companies that continue to operate. This paper proposes that the majority of zombie firms can be viable, with positive continuation value, and arise endogenously from productivity shocks. Drawing on firm-level data covering the universe of Canadian firms and seven European countries, we document five stylized facts: zombie firms are widespread, unprofitable, unproductive, micro-sized, and transitory. We rationalize these findings by building a general equilibrium model of heterogeneous firms that abstracts from the conventional distortions thought to explain zombie firms. We show that standard productivity shocks are sufficient to explain the empirical patterns, and that the volatility of these shocks can be a key determinant of viable zombie firms, generating shares up to 35%. Since this volatility can also raise aggregate productivity and household utility, the presence of zombie firms is not a sufficient condition for lower welfare. Using a model-based definition to distinguish viability, we find limited evidence—around 0.25%—of unviable zombie firms in the data. Our results challenge the prevailing view that persistently weak firms are unviable and suggest that existing zombie firm measures likely capture viable firms.