Zombie firms and the take-up of support measures during Covid-19

In this paper, we analyse the incidence of zombie firms, how they have been affected by the pandemic, and their take-up of economic support measures. While balance sheet data for 2020 are not available yet, we find that in 2019, they represented 3 to 5 per cent of all corporations. In 2020, they were more likely to experience liquidity deficits and spikes in their default probability, as well as to exit the market. Importantly, we also find that they were less likely to take up the economic support measures. Overall, as fewer firms exited the market in 2020 than in 2019, the pandemic is likely to have boosted the zombie share. However, compared with other firms, zombies have exited the market more and had a lower take-up of support measures. Thus, the Government’s policies are unlikely to have amplified such a trend.