Opinion | The post-pandemic world looks set to be littered with zombie companies, zombie markets and zombie economies, kept on life support in response to COVID-19
The post-pandemic world appears likely to be littered with zombie companies, zombie markets and zombie economies, underwritten and kept on life support by the unprecedented responses of central banks and governments to COVID-19.
The BIS data is based on listed companies, although it does discuss the implications of its findings for what might be occurring among unlisted entities.The data shows that from the late 1980s to 2017 the proportion of zombie companies in listed markets rose from 4 per cent to 15 per cent. The new deluge of cheap liquidity and debt threatens to create zombie markets and economies, dependent on unprecedented levels of liquidity, negative real interest rates and massive fiscal stimulus to stay afloat.
While they are twice as likely to "die" via takeover or bankruptcy the analysis found that only 25 per cent exit the markets and, surprisingly, about 60 per cent are able to lose their zombie status, albeit that they continue to underperform and face a high probability of relapsing. The new deluge of cheap liquidity and debt threatens to create zombie markets and economies, dependent on unprecedented levels of liquidity, negative real interest rates and massive fiscal stimulus to stay afloat.
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