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Whither the Walking Dead? The Consequences of Artificial Intelligence for Zombie Firms

Author

Listed:
  • Banerjee Ryan

    (30225 Bank for International Settlements , Basel, Switzerland)

  • Doerr Sebastian

    (30225 Bank for International Settlements , Basel, Switzerland)

  • Hofmann Boris

    (30225 Bank for International Settlements , Basel, Switzerland)

Abstract

Zombie firms have been a prominent yet controversial subject of academic and policy debates in recent years. In this article, we first revisit the economic consequences and driving factors of zombie companies and then, based on this assessment, discuss the implications of artificial intelligence (AI) for zombie firms. We document that the share of zombie firms in advanced economies has risen considerably over the past three decades, and that this increase has been a significant drag on productivity growth. We further find that persistently low interest rates are a significant causal factor underlying the rise of zombie companies. Turning to AI, we argue that an AI-induced productivity boom may counteract the drag from zombie firms and improve firm performance, mitigating corporate zombification. Moreover, by leading to higher interest rates that force zombie firms to exit markets, AI may boost productivity further in the longer run – a so far overlooked channel in the debate on the economic implications of AI.

Suggested Citation

  • Banerjee Ryan & Doerr Sebastian & Hofmann Boris, 2024. "Whither the Walking Dead? The Consequences of Artificial Intelligence for Zombie Firms," The Economists' Voice, De Gruyter, vol. 21(2), pages 237-248.
    • Handle: RePEc:bpj:evoice:v:21:y:2024:i:2:p:237-248:n:1011
    DOI: 10.1515/ev-2024-0061
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    More about this item

    Keywords

    productivity; zombie firms; interest rates; artificial intelligence;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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