9 May 2022

Credit Research Centre Seminar Series: Global Zombies was held on 29 April 2022.

The Credit Research Centre Seminar series featured Professor Edward I. Altman, the creator of the famous z-score model. Prof Altman spoke about 'global zombies'. The report was co-authored by Rui Dai from the Wharton Research Data Services of the University of Pennsylvania and Wei Wang from the Smith School of Business, Queen's University.

The seminar proposed a two-step filtering process based on interest coverage ratio and default prediction models to assess the global extent of "zombieism": the existence of companies that were insolvent but continued to exist due to unusual market conditions, financial institutions, and investor or government support. The seminar also discussed how the average fraction of publicly traded zombie firms in the world's 20 largest economies has increased significantly over the last 30 years but has barely changed during the pandemic period in 2020, concluding that democratic accountability, financial market development, creditor rights, and debt enforcement efficiency can help to explain cross-country variations in zombie ratios. The seminar additionally addressed adopting staggered bankruptcy reforms in eight countries after 2000 as an exogenous variation to bankruptcy code modernization and discovered that the zombie ratio decreases by an average of 1.4 percentage points after the reforms in those countries.

Read the complete paper for a more in-depth understanding of the seminar and its significance.