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Credit Access and Zombie Firms: A Study on State-Owned, Private, and Foreign-Invested Firms in A Transition Economy

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  • Nam Hoang Vu
  • Linh Hai Bui
  • Tam Minh Tran
  • Huong Thanh Ha
  • Lam Dang Nguyen

Abstract

The existence of zombie firms is one of the more notable problems in many transition economies since these companies can hamper sustainable economic development. This paper examines the impact of credit access on the existence and recovery of zombie firms. Using a comprehensive dataset comprising a large number of firms operating in Vietnam during the period from 2006 to 2015, we find that having access to credit reduces the likelihood that a firm is a zombie. We also find that credit access is only useful for firms to escape from being zombies up to a certain threshold. While access to credit reduces the likelihood of private domestic firms being zombies, the study finds that it has no significant effect on state-owned and foreign invested firms. Moreover, the impact of credit access is only detected when firms borrow from formal sources of credit.

Suggested Citation

  • Nam Hoang Vu & Linh Hai Bui & Tam Minh Tran & Huong Thanh Ha & Lam Dang Nguyen, 2023. "Credit Access and Zombie Firms: A Study on State-Owned, Private, and Foreign-Invested Firms in A Transition Economy," International Journal of Public Administration, Taylor & Francis Journals, vol. 46(12), pages 833-846, September.
    • Handle: RePEc:taf:lpadxx:v:46:y:2023:i:12:p:833-846
    DOI: 10.1080/01900692.2022.2025830
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