Public lecture by Professor Edward Altman: “Global Zombie Companies: Measurements, Determinants, and Outcomes”

The School of Economics and Management of the University of Cyprus, with the support of Alpha Bank Cyprus Ltd, had the honor of hosting a public lecture on June 4, 2024, by the internationally renowned Professor of Finance at New York University, Edward I. Altman. The event took place in the Ceremony Hall of the University of Cyprus in the presence of academics, students, and many professionals from the banking and financial sectors.

In his introductory speech, the Dean of the School of Economics and Management, Professor Sofronis Clerides, highlighted the speaker’s impressive academic background and the significant impact of his work both in academia and the professional field. He also emphasized the importance of such events, which align with the University of Cyprus’s mission to serve as a bridge between the international scientific community and the local society. Through these initiatives, the dissemination of scientific knowledge is promoted, and students, professionals, and the general public have the opportunity to engage with distinguished international speakers.

Professor Edward I. Altman is globally recognized for developing the Z-score model, which has been instrumental in understanding and assessing a company’s financial health. In his lecture, Professor Altman presented a new study titled “Global Zombie Companies: Measurements, Determinants, and Outcomes,” published this year in the leading academic journal Journal of International Business Studies. The study examines the phenomenon of “zombie companies”—firms that, despite being financially unviable, continue to operate, often due to favorable credit conditions and other external factors. Professor Altman explained the factors that keep these businesses afloat, the risks they pose, and their impact on economic stability, resource allocation, and long-term growth.

Professor Altman’s study introduces a new index to measure the extent of zombie companies in the world’s 20 largest economies. The findings indicate that the average percentage of zombie firms among publicly listed companies in these 20 countries has risen significantly from 1.5% in 1990 to approximately 7% in 2020. Zombie firms are typically small and medium-sized businesses. Economic growth, industry-specific characteristics, and loose monetary policies significantly contribute to their persistence. The presence of zombie companies creates considerable market congestion, restricting the growth of healthy firms. Additionally, he argued that the expansion of global corporate bond markets has fueled the rise of zombie firms. On average, zombie companies survive for about five years before declaring bankruptcy, being delisted, or acquired. In conclusion, he stated that reforms in bankruptcy procedures help reduce the prevalence of zombie firms.

A discussion followed, during which Professor Altman answered questions and comments from the audience. The conversation among attendees continued in a more relaxed setting during the reception held in the courtyard of the venue.

The main sponsor of the event was Alpha Bank Cyprus Ltd, and the media sponsor was Politis, both of whom the School warmly thanks for their tangible support in successfully organizing the event.