Zombie firms and the process of natural selection

  • Mariana Rodrigo Dias (Student)

Student thesis: Master's Thesis


The topic of zombie firms has become an increasingly researched topic over the years, specifically in Portugal, as zombie firms’ presence in the market is no secret, especially comparing to other European countries. In this paper, I decided to look at the presence of zombie firms in the Portuguese market over 9 years, studying their evolution and the most relevant contributing indicators. For this purpose, I looked at the decision zombie firms take when it comes to staying in the market, and, under which conditions: by restructuring themselves and thus becoming healthy firms, by remaining zombies, or simply exiting the market. While this “choice” is not only dependent of firms themselves and of the variables studied, I found that increases in debt have a negative relationship on firms’ ability to restructure themselves (vs. exiting the market), while increases of number of employees, total assets and of the return on assets indicator have a positive relationship with the ability to recover. Meanwhile, for firms who stick with their zombie status (vs. leaving), increases in the labour force and on return on assets have a negative association with this outcome, while obtaining more debt and increases in total assets have the opposite effect. I find that the variable leverage has little impact in terms of economic significance, despite being statistically significant (for restructured firms). Finally, I have also found that different definitions of zombie firms can lead to different conclusions despite analysing the same sample.
Date of Award28 Jan 2022
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorDiana Bonfim (Supervisor)


  • Zombie firms
  • Exit
  • Recovery
  • Restructuring
  • Forbearance lending


  • Mestrado em Finanças

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