COMPARATIVE ANALYSIS OF STOCK RETURNS OF ZOMBIE FIRMS AND BIST 30 FIRMS WITH STATISTICAL METHODS

Year 2023, Volume: 21 Issue: 3, 298 - 311, 14.10.2023

Mukadder Horasan

https://doi.org/10.11611/yead.1371306

Abstract

The concept of ‘zombie’ companies was first proposed by Kane in 1987. The three common features of these companies are listed as follows; high debt level, low profit rate and productive companies reduce their productivity. Zombie firms are defined as companies with persistently low profitability, high leverage, or negative equity capital. However, instead of defining a business as a zombie with single company data, it would be more accurate to look at bank and company level data that also show the lending relationships between credit institutions and corporate debtors. (Álvarez et al., 2023).
In our study, companies having negative equity capital for at least three consecutive years were considered zombies, whereas these companies were selected from the ISO 1000 industrial enterprises. Particular attention was paid to ensure these companies continued to be traded on BIST. Additionally, BIST 30 companies were analyzed and stock returns and statistical evaluations were also analyzed.

Keywords

Zombie Firms, Finance, BIST30

References

• Ahearne, A. G. and Shinada, N. (2005) ‘‘Zombie Firms and Economic Stagnation in Japan’’, International Economics and Economic Policy, 2(4): 363–381, https://doi.org/10.1007/s10368-005-0041-1.
• Álvarez, L., García-Posada, M. and Mayordomo, S. (2023) ‘‘Distressed Firms, Zombie Firms and Zombie Lending: A Taxonomy’’, Journal of Banking and Finance, 149: 106762, https://doi.org/10.1016/j.jbankfin.2023.106762.
• Andrews, D. and Petroulakis, F. (2019) ‘‘Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe’’, In ECB Working Paper Series (Issue 2240), https://doi.org/10.1787/0815ce0c-en.
• Banerjee, R. and Hofmann, B. (2018) ‘‘The Rise of Zombie Firms: Causes and Consequences’’, BIS Quaterly Review, September, 67–78, www.bis.org/publ/qtrpdf/r_qt1703.htm.
• Cai, G., Zhang, X. and Yang, H. (2022) ‘‘Fiscal Stress and the Formation of Zombie Firms: Evidence from China’’, China Economic Review, 71(May 2021), 101720, https://doi.org/10.1016/j.chieco.2021.101720.
• Carreira, C., Teixeira, P. and Nieto-Carrillo, E. (2022) ‘‘Recovery and Exit of Zombie Firms in Portugal’’, Small Business Economics, 59(2): 491–519, https://doi.org/10.1007/s11187-021-00483-8.
• Chang, Q., Zhou, Y., Liu, G., Wang, D. and Zhang, X. (2021) 2‘How Does Government Intervention Affect the Formation of Zombie Firms?’’, Economic Modelling, 94(February 2020), 768–779, https://doi.org/10.1016/j.econmod.2020.02.017.
• Chao, S., Guo, L. and Sun, S. (2022) ‘‘Zombie Problem: Normal Firms’ Wastewater Pollution’’, Journal of Cleaner Production, 330(866), 129893, https://doi.org/10.1016/j.jclepro.2021.129893.
• El Ghoul, S., Fu, Z. and Guedhami, O. (2021) ‘‘Zombie Firms: Prevalence, Determinants, and Corporate Policies’’, Finance Research Letters, 41(April 2020), 101876, https://doi.org/10.1016/j.frl.2020.101876.
• Fang, J., Gozgor, G., Lau, C. K. M., Wu, W. and Yan, C. (2020) ‘‘Listed Zombie Firms and Top Executive Gender: Evidence from an Emerging Market’’, Pacific Basin Finance Journal, 62(May), 1–17, https://doi.org/10.1016/j.pacfin.2020.101357.
• Feng, L., Lang, H. and Pei, T. (2022) ‘‘Zombie Firms and Corporate Savings: Evidence from Chinese Manufacturing Firms’’, International Review of Economics and Finance, 79: 551–564, https://doi.org/10.1016/j.iref.2022.02.008.
• Fukuda, S. ichi and Nakamura, J. ichi. (2011) ‘‘Why did “Zombie” Firms Recover in Japan?’’, World Economy, 34(7), 1124–1137, https://doi.org/10.1111/j.1467-9701.2011.01368.x.
• Geng, Y., Liu, W. and Wu, Y. (2021) ‘‘How Do Zombie Firms Affect China’s Industrial Upgrading?’’, Economic Modelling, 97: 79–94, https://doi.org/10.1016/j.econmod.2021.01.010.
• Han, S., Li, G., Lubrano, M. and Xun, Z. (2020) ‘‘Lie of The Weak: Inconsistent Corporate Social Responsibility Activities of Chinese Zombie Firms’’, Journal of Cleaner Production, 253: 119858, https://doi.org/10.1016/j.jclepro.2019.119858.
• Liu, G., Zhang, X., Zhang, W. and Wang, D. (2019) ‘‘The Impact of Government Subsisied on The Capacıty Utilization of Zombie Firms’’, Economic Modelling, 83: 51–64, https://doi.org/10.1016/j.econmod.2019.09.034.
• McGowan, M. A., Andrews, D. and Millot, V. (2017) ‘‘The Walking Dead? Zombie Firms and Productivity Performance in OECD Countries’’, In OECD Economics Department Working Papers No. 1372, https://doi.org/https://dx.doi.org/10.1787/180d80ad-en.
• Nieto-Carrillo, E., Carreira, C. and Teixeira, P. (2022) ‘‘Giving Zombie Firms a Second Chance: An Assessment of the Reform of the Portuguese Insolvency Framework’’, Economic Analysis and Policy, 76: 156–181, https://doi.org/10.1016/j.eap.2022.08.003.
• Qiao, L. and Fei, J. (2022) ‘‘Government Subsidies, Enterprise Operating Efficiency, and “Stiff but Deathless” Zombie Firms’’, Economic Modelling, 107(155), https://doi.org/10.1016/j.econmod.2021.105728.
• Şahin, A. (2021) ‘‘Zombi Şirketlerin Risk Düzeyi ile İlişkili Olan Finansal Özellikleri: İSO 1000 Firmaları ile Bir İnceleme’’, Journal of Yasar University, August 2020, 278–297.
• Shen, G. and Chen, B. (2017) ‘‘Zombie Firms and Over-Capacity in Chinese Manufacturing’’, China Economic Review, 44: 327–342, https://doi.org/10.1016/j.chieco.2017.05.008.
• Tan, Y., Huang, Y. and Woo, W. T. (2016) ‘‘Zombie Firms and the Crowding-Out of Private Investment in China’’, Asian Economic Papers, 15(3): 32–55, https://doi.org/10.1162/ASEP_a_00474.
• Wu, H., Yang, M. and Gu, J. (2021) ‘‘Are Zombie Firms More Incentivized to Financialize?’’, China Journal of Accounting Research, 14(4): 100199, https://doi.org/10.1016/j.cjar.2021.05.003.
• Yu, M., Guo, Y. M., Wang, D. and Gao, X. (2021) ‘‘How do Zombie Firms Affect Debt Financing Costs of Others: From Spillover Effects Views’’, Pacific Basin Finance Journal, 65: 101471, https://doi.org/10.1016/j.pacfin.2020.101471.
• Zhang, X. and Huang, B. (2022) ‘‘Does Bank Competition Inhibit the Formation of Zombie Firms?’’ International Review of Economics and Finance, 80: 1045–1060, https://doi.org/10.1016/j.iref.2022.03.011.