Firms that are persistently unprofitable yet continue to operate. Across the world, the share of listed companies that are zombies grew from 6% in 2000 to 9% in 2021, according to research by Bruno Albuquerque of the IMF and Roshan Iyer of American University. Economists once argued that zombie firms were a product of low interest rates, which allowed bad companies to service their debts and limp along. Yet even as rates have risen, so have the ranks of the undead: a report from BofA Securities found that the share of European companies in this category rose from 2023 to 2025.
Zombie firms survive in part because of benign economic conditions. Managers need not obsess about cost-cutting; banks are happier to "extend and pretend" on loans; workers may have other sources of income that compensate for poor pay.
Their influence grows more malign over time. In the decade to 2022 the least productive British companies also saw the slowest productivity growth, dragging down the average. Albuquerque and Iyer find that in industries with more zombie firms, "healthy firms exit the market faster and entry rates are lower, hindering healthy creative destruction." Zombies keep workers in positions poorly matched to their skills, depriving better companies of their talents. Consistent with the rise in zombie firms, job-to-job moves across the rich world are in steady decline.
I love dogs, but I hate Chihuahuas. A Chihuahua isn't a dog. It's a rat with a thyroid problem.