Definition
A Zombie Company is a firm that, although still in operation, is unable to grow or cover its debt servicing costs with its current earnings. These companies typically generate just enough revenue to continue operating and pay interest on their debt but do not have the financial health to invest in growth, innovation, or significant improvements. The term "zombie" reflects their inability to progress or contribute meaningfully to the economy, much like the walking dead.
Zombie companies often survive due to favorable lending conditions, such as low-interest rates or continued financial support from banks or investors unwilling to write off their debts. These companies can pose a risk to the broader economy by tying up resources that could be more effectively used by healthier, more innovative firms. Their presence can also distort market competition and lead to inefficiencies. Recognizing and addressing the challenges posed by zombie companies is important for ensuring long-term economic vitality and growth.
