Too dead to fail: The effect of organizational structure on zombie firms
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2025-07
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en
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Abstract
This study investigates the relationship between corporate group affiliation and the likelihood
of firms becoming zombie firms. Zombie firms are defined as companies that remain operational
despite continued unprofitability, potentially distorting resource allocation and hindering
economic growth. Using firm-level data from the ten largest economies in the European Union
between 2016 and 2023. This study conducts a logistic regression analysis to assess whether firms
within business groups are more likely to become zombies compared to standalone firms. The
results show that group affiliation is positively and significantly associated with zombie status.
Robustness checks using an alternative definition based on the interest coverage ratio and the
exclusion of Italian firms from the dataset confirm the results, although the strength of the
relationship varies. These findings suggest that internal financial support within business groups
may allow unproductive firms to persist, and that national context can influence this effect. The
study contributes to the literature by highlighting organizational structure as a key factor in firm
survival and offers implications for policymakers and creditors in assessing firm viability and
designing targeted interventions
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Faculteit der Managementwetenschappen