![]() Note: This figure plots the share of publicly listed firms that are in zombie status during 2000-20. For listed firms-for which balance sheet data are available-we also estimate that the share of firms in zombie status in 2020 remains in the single digits despite the severity of the COVID-19 recession. 6Īs shown in Figure 1, between 20, our filters select roughly 10 percent of public firms and five percent of private firms as zombies. The FR Y-14Q data has the advantage that it provides the most comprehensive coverage of private U.S. For private firms, the data source is the supervisory FR Y-14Q database, which contains annual balance sheet data for firms borrowing from banks that are subject to supervisory stress tests. For publicly listed firms, we obtain financial information from Compustat. 4 High leverage and low ICR help identify firms that cannot cover their debt-servicing costs, while negative sales growth identifies firms with low growth prospects, as sales growth is a good predictor of firms' future performance. 3 More precisely, we require that zombie firms have leverage above the sample annual median, interest coverage ratio (ICR) below one, and negative real sales growth over the preceding three years. ![]() data by requiring that they are highly leveraged and unprofitable. Accordingly, we identify zombie firms in U.S. There is no formal definition of a zombie firm, but it is generally agreed that these firms are economically unviable and manage to survive by tapping banks and capital markets (Caballero, Hoshi, and Kashyap 2008). economy, assessing whether the pandemic-driven recession and the unprecedented fiscal and monetary support that it triggered could lead to the proliferation of zombie firms remains an open question that can only be addressed as more data become available. While these findings shed new light on the nature and importance of zombie firms in the U.S. Furthermore, the share of listed firms that we identify as zombies displays a cyclical pattern, rising in recessions and falling during expansions, likely reflecting a mix of aggregate and industry-specific shocks. Among both private and publicly listed firms, zombie firms are few in number and generally small they are mostly concentrated in the manufacturing and retail sectors and account for a small share of total credit to nonfinancial firms. Our main finding is that zombie firms are not a prominent feature of the U.S. In this note, we present new facts about zombie firms in the United States that help inform this debate: we identify zombie firms and estimate the share of such firms among private and publicly listed firms discuss their main characteristics and examine their ability to tap credit markets before and after the onset of the pandemic. Many observers have recently commented that zombie firms may crowd out lending to productive firms and erode the strength of the U.S. The unprecedented fiscal and monetary policy support in the wake of the COVID-19 pandemic has brought to the fore concerns that cheap credit could fuel the financing of zombie firms-that is, firms that are unable to generate enough profits to cover debt-servicing costs and that need to borrow to stay alive. Giovanni Favara, Camelia Minoiu, and Ander Perez-Orive Zombie Firms: How Many and How Consequential? 1 Factors Affecting Reserve Balances - H.4.1.Industrial Production and Capacity Utilization - G.17.Survey of Household Economics and Decisionmaking.Household Debt Service and Financial Obligations Ratios.Financial Accounts of the United States - Z.1.Statistics Reported by Banks and Other Financial Firms in the.Senior Credit Officer Opinion Survey on Dealer Financing.New Security Issues, State and Local Governments.Senior Loan Officer Opinion Survey on Bank Lending.Charge-Off and Delinquency Rates on Loans and Leases at. ![]() Assets and Liabilities of Commercial Banks in the U.S. ![]()
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