A Foreign Literature Review of Zombie Companies Research

Liu Kuifu, Mao Ning

Foreign Economics & Management Vol. 38, Issue 10, pp. 3 - 19 (2016)  DOI:10.16538/j.cnki.fem.2016.10.001

Abstract

Zombie companies usually denote the firms who have fallen into financial distress but can be on life support owing to creditors' help. At present, zombie companies issue has been a significant problem facing our country and has severe consequences. After 2000, zombie companies gradually become a hot topic in international academia. However, at the meantime, domestic research about zombie companies is still scarce. In light of this context, this paper makes an attempt to thoroughly review the existing foreign research on zombie companies and summarizes the notion, recognition methods, causes, and effects concerning zombie companies, It argues that the definition of zombie companies ought to satisfy the criteria of "falling into financial distress" and "continuous provision of financial aids by the creditors", banks' perverse incentive to cover bad loans is one of main causes of zombie companies, and zombie companies have seriously negative impacts on industry productivity and economic growth. It makes great contributions to a grasp of the context and potential research directions of zombie companies research, and the promotion of deep understanding of zombie companies and seeking valid solutions in practice.

Keywords

zombie company; bad bank loan; bank recapitalization; financial distress