The economic and social dilemma of zombie companies worldwide: institutional context and poverty impact analysis
Year: 2025
Type: article
Abstract: Purpose Research on the number of zombie companies and their economic impact has increased exponentially in recent years. However, their social impact is hardly analysed. Zombification is not a problem limited to only some countries, nor is it due only to company management; it is influenced by country-level institutional contexts. Using a utilitarian perspective, this paper aims to identify the country-level institutional contexts in which zombie companies arise and to analyse their social impact worldwide, taking inequality as a social indicator. Understanding zombification is vital for maximizing societal well-being. Design/methodology/approach The sample studied here consists of 87,573 companies from 115 countries with negative equity over the three business years from 2019 to 2021. A mediating model is proposed, in which the degree of zombification of a country mediates the relationship between the institutional context and income inequality. The utilitarian perspective is used as an effective practical approach that prioritizes maximizing overall societal well-being and outcomes. Findings The results indicate that the number of zombies is influenced by country-level economic and political aspects; however, zombies do not increase inequality in countries. Indeed, the opposite occurs: Zombie companies lead to a reduction in inequality (Gini Index), probably due to a poverty alleviation shock. From a utilitarian perspective, this outcome aligns with the goal of improving societal well-being. Practical implications This paper makes three contributions: firstly, the zombie problem is considered worldwide; secondly, country-level institutional factors are analysed to explain the existence of zombie companies; and thirdly, the social aspect is included as a relevant approach for understanding zombie theory. Social implications From a utilitarian perspective, the existence of zombie companies maximizes societal well-being by redistributing wealth from capital income to labour income. Despite the financial inefficiencies of zombie companies, they play a role in reducing income inequality and preventing poverty. This paper highlights the importance of considering social factors when assessing the broader impacts of zombie companies, as they contribute to poverty reduction and promote greater income equality in specific contexts. Originality/value A favourable institutional environment is not conducive to the elimination of zombie companies, but rather favours them. This paper concludes that zombie companies, contrary to their reputation as economic drains, contribute to reducing income inequality, measured by the Gini Index. This paper distinguishes itself by integrating social considerations into the economic analysis, providing a deeper understanding of the broader impacts of zombie companies.
Institution: University of the Basque Country
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4408257152