Since the 2008 recession, we have witnessed the infiltration of
seemingly benign economic creatures with a dark side...They limit
domestic productivity and threaten to exacerbate a future economic
downturn. They are the zombie firms.
Zombie firms can be defined as companies where turnover is
static or falling, profitability is persistently low, margins are
being squeezed, cash and working capital reserves are limited,
leverage levels are high, and where there's a limited ability
to invest in new equipment, products or processes.
The sharp rise in zombie firms in Europe over the past decade
could be explained by the loose monetary policy environment,
greater creditor forbearance by lenders, and government policies
that fueled lending. Rather than cease trading, businesses have
staggered on creating a notable drag on European productivity.
