Zombie firms and resource allocation: research trends and developments during the spread of COVID-19

We identify so-called “zombie firms,” which survive with banks’ and governments’ support despite performing poorly without the prospect of recovery, using firms’ financial data. We set the criteria of the zombie firms by arranging methodologies proposed by the existing studies. It mainly focuses on Japan after the collapse of its bubble economy, European countries after the global financial crisis and the sovereign debt crises, China under debt expansion, and developed countries during the spread of COVID-19. The analysis shows that the number of zombie firms surged after the collapse of the bubble economy in the early 1990s in Japan. At least based on the currently available data in fiscal 2020 after the spread of COVID-19, we do not detect a problematic growth in the number of zombie firms as in the 1990s.