Zombification in SMEs : evidence from Germany

• Autor(a) principal: Klingebiel, Lukas
• Data de Publicação: 2023
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/42211
• topic: Zombification; Capital misallocation; Subsidized credit; Productivity; Alocação incorreta de capital; Crédito subsidiado; Produtividade; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

We demonstrate that within unlisted small and medium-sized enterprises (SMEs) in Germany, there is an investment and employment displacement caused by zombie firms. Based on firm-level data, we show that these firms exhibit significantly lower profitability and productivity compared to healthy firms, thereby pushing out more productive capital from the market as they are artificially kept alive through subsidized credit. Between 2010 and 2020, the proportion of SMEs classified as zombies for at least one year increased more than eightfold. We provide evidence that a higher proportion of zombie firms in a given sector leads to a decline in employment growth of healthy firms, and that there is no significant difference in the relative costs for a zombie firm to service their outstanding loans compared to a healthy firm. To prevent future welfare losses, it is necessary to implement more effective policy measures aimed at reducing the incentives for self-liable entrepreneurs and banks to extend loans while promoting resolutions and restructuring processes.