Giving zombie firms a second chance: An assessment of the reform of the Portuguese insolvency framework

• Autor(a) principal: Carreira, Carlos
• Data de Publicação: 2022
• Outros Autores: Teixeira, Paulino, Nieto-Carrillo, Ernesto
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10316/104762
• topic: Insolvency regimes; Zombie firms; Productivity; Reallocation barriers; Firm exit; Restructuring

In most advanced economies productivity growth has been hampered by barriers that allow zombie firms to survive. We examine the effectiveness of institutional reforms in Portugal that were aimed to improve efficiency in insolvency framework. Estimates show that reallocation barriers declined. The reforms appear to have larger and more effective results in zombie recovery than in exit. Firm size plays a major role in tackling zombie-entrenchment. The decline in barriers has also implied a lower distortion in the economy-wide selection process. The new setting seems to be more desirable than forcing zombie exit at all costs.