Identification and visualisation of zombie firms using self-organizing maps

Abstract

The growing share of zombie firms in developed countries puts economic growth at risk, yet understanding of these uncompetitive firms remains limited. To develop new insights and understanding of zombie firms, the current study relies on data analysis and predictive modeling and aims to establish a financial diagnosis method, based on a self-organizing map of the financial profiles of zombie firms and their pathways to zombification. This article also presents a SOM-SVM prediction model that seeks to anticipate zombie firms. The findings identify diverse profiles of zombie firms; their financial evolution from initial risky phases to zombification are not uniform. The financial deterioration that leads to zombification often cannot be observed in advance, which represents a major hurdle to efforts to differentiate zombie firms from healthy ones and restricts the effectiveness of prediction methods for identifying zombie firms in initial phases.