Zombie firms: corporate carrion
Fraser Tennant | Financier Worldwide | 23 july 2015
PA is quoted in an article about zombies in Financier Worldwide magazine. The article reports that these are unproductive corporate entities that continue to operate due to ultra-low interest rates and the forbearance of creditors.
Commenting on how zombie companies still infect global economic growth, PA Consulting Group comments: “The real danger of zombie companies is that they are unable to contribute to growth in the global economy as they cannot invest”.
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The article goes on to look at the threat of other forms of zombie: zombie banks, zombie consumers and zombie governments. According to the article, it is these three types of zombie that are holding back the global economy. PA comments: “At a time when there is a shortage of high quality jobs, businesses struggle to find demand for their products, and investors struggle to find high return opportunities to invest in, an aggressive approach to liquidation would result in not ‘creative destruction’ but destructive destruction. Once healthy demand returns to product, capital and labour markets, ‘creative destruction’ will again be a valid concept. Until then, the focus needs to be on these other categories of zombie.”