How has the pandemic impacted zombie firms in Europe?

Abstract

This paper studies how the pandemic has impacted zombie firms in Europe. After a decade of low interest rates, did lockdowns and policies implemented during Covid-19 affect the prevalence of zombie firms in Europe? This is a relevant topic as we have just emerged from a pandemic shock with widespread economic consequences that are still being felt, and zombie prevalence may stem from lenient economic policies and eventually lead to economic stagnation. The paper analyses this question in two ways: first by estimating a regression on a panel dataset to compare the relationships pre-Covid to the literature, and then using Covid-19 data on this same relationship; second by estimating a regression on a cross-section dataset that captures the change in specific variables pre and post-Covid. The results of the first regression show that Covid-19 was positively related to zombie prevalence at a 10% significance level, but the second regression did not find any significant relationship. Overall, this paper did not reach any conclusive evidence that Covid-19 had a significant impact on the prevalence of zombie firms in Europe, possibly due to the wide-ranging policy support.

Date of Award	18 Oct 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Diana Bonfim (Supervisor)