Published Online:April 2026
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP020426
DOI:10.71329/IUPJARAP/2026.25.2.42-72
Author Name:S Yesaswi Dora and Ajay Kumar Mishra
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:42-72
The paper investigates zombification among Indian firms across different market capitalizations, using a dataset of 42,259 firm-year observations from 2011 to 2023. Employing a refined methodology to identify zombie firms, the paper examines how firmspecific attributes—profitability, liquidity, debt levels, and cash outflows—influence zombification risk. The results reveal that nano-cap firms are most vulnerable, while firms with lower profitability, weaker liquidity, higher leverage, and excess cash outflows face a greater likelihood of becoming zombies. Zombie firms consistently exhibit heightened financial fragility. The findings suggest that policy measures should focus on improving credit allocation efficiency and facilitating the exit or restructuring of nonviable firms to preserve financial system stability and promote sustainable economic growth.
The phenomenon of zombie firms—companies unable to sustain operations without external financial support—has attracted considerable attention due to its profound implications for economic productivity, resource misallocation, and market distortions (Banerjee & Hofmann, 2018; Caballero et al., 2008).