Zombie companies—businesses that survive on external funding but can't cover their debt payments from current profits—have surged nearly 9 percent annually since 2010, now totaling 2,370 worldwide, according to a recent report by Kearney. This growth is attributed to high inflation and elevated borrowing costs, with Kearney identifying 827 new zombie companies in 2023. These businesses represent 5.8 percent of publicly traded firms globally. The report analyzed 75,000 companies across 154 industries and 152 countries, utilizing over 5.5 million data points to assess financial viability from 2000 to the present.
The research indicates that smaller firms, particularly those with annual revenues of $500 million or less, are disproportionately affected, with their zombie share increasing from 6.2 percent in 2022 to 6.7 percent in 2023. As companies grapple with rising interest rates, Kearney conducted stress tests predicting a potential rise in zombie companies, where increased debt servicing could affect 6.6 percent to 7.7 percent of firms. Experts from Kearney emphasize the urgency for businesses to adopt proactive strategies, such as restructuring or debt conversion, to enhance resilience and avoid insolvency.
