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Zombie companies are hiding an uncomfortable truth about the global economy

Reuters/Mike Segar
Zombie companies are occupying the global economy.
  • John Detrixhe
By John Detrixhe

Future of finance reporter

Published Last updated on

What do a satellite company, a rural hospital chain, and an oil driller have in common? They are all considered zombie companies.

For economists, the corporate version of the living dead is a business that’s kept alive by financing instead of by making money. Or, in accountant terms, these are companies that don’t generate enough profit to cover the cost of the interest on their debts.

The zombies’ share of the market appears to be growing. About 17% of the world’s 45,000 public companies covered by FactSet haven’t generated enough earnings before interest and taxes (EBIT) to cover interest costs for at least the past three years. Bank for International Settlements economists, using a similar but narrower definition, find that the world’s equity markets’ share of zombies has risen to more than 12%, up more than 8 percentage points since the mid 1990s.

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