The life and death of zombies – evidence from government subsidies to firms

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dc.contributor Bank of Finland Nurmi, Satu Vanhala, Juuso Virén, Matti 2020-05-14T07:55:19Z 2020-05-14T07:55:19Z 2020
dc.identifier.isbn 978-952-323-328-7
dc.identifier.issn 1456-6184
dc.description.abstract We analyze the demographics of zombie firms and durations of zombie spells as well as their determinants, including an application on public subsidies using firm level population panel data from Finland. Firm-level analysis of firm demographics reveals that zombie-firms, as commonly defined in the literature, are often not truly distressed firms but rather companies with temporarily low revenues relative to interest payments. More importantly, we find that roughly a third of these firms are in fact growing companies and two thirds recover from the zombie status to become healthy firms. We also show that the increase of zombie firms over the past 15 years has mainly been driven by cyclical factors, as opposed to a secular trend. In our policy application on government subsidies to firms, estimation results strongly suggest that subsidy-receiving firms are less likely to die, regardless of the type of subsidy. However, with regard to recovery there is heterogeneity in the effects depending on the type of firm and the type of subsidy received. Thus, we do not find a robust positive association of subsidies with zombie recovery.
dc.format.extent 35
dc.language.iso ENG
dc.subject Suomi
dc.subject.other zombies
dc.subject.other misallocation
dc.subject.other firm exit
dc.subject.other firm growth
dc.subject.other subsidies
dc.subject.other productivity
dc.title The life and death of zombies – evidence from government subsidies to firms
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-202005142140
dc.subject.jel D22
dc.subject.jel D24
dc.subject.jel G33
dc.subject.jel H25
dc.subject.jel L16
dc.subject.jel L25
dc.subject.jel O25 Bank of Finland Research Discussion Papers
dc.series.year 2020
dc.series.number 8/2020
dc.series.sortingnumber 0008 14.5.2020
dc.subject.yso yritykset
dc.subject.yso tuottavuus
dc.subject.yso valtiontuki
dc.subject.yso tukipalkkiot
bof-internal.includedInCRIS 1
dc.type.okm D4

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