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The persistence of zombie firms in a low yield world

March 1, 2018
In the fourth part of our series on the impact of rising yields, we discuss the rising incidence of zombie firms in recent years. Bottom-up data of some 3,000 companies in the FTSE All World index show that the percentage of zombie firms has more than tripled to 2.0% of firms in 2016 from 0.6% in 1996. Such firms are defined as those with an interest coverage ratio under 1x for 2 consecutive years and a price to sales ratio under 3x. That matters because zombie firms are linked to fading business dynamism and because years of low interest rates should have led to fewer such firms, not more. There are early signs we are at a turning point, however. The numbers for 2017, with two-thirds of firms reporting, suggest that zombie firm incidence declined sharply last year. If this proves to be a real trend, it may give central banks confidence that continuing to raise rates and pull away from unconventional monetary policy will have some advantages. [more]

More documents about "International"

178 (37-48)
June 25, 2019
Analyst:
37
For the first time ever the Fed is undertaking a thorough academic review of its policy strategy, tools, and communication practices. The reviewers are some 30 academic experts on monetary policy and macroeconomics. Listen to Peter Hooper, Global Head of Economic Research, discussing the background to the review, the low-rate monetary policy and what a downturn could mean for financial stability. [more]
May 15, 2019
43
Who pays when a tariff is imposed on an imported product? Formally, of course, it is the importer that is assessed the tariff. But if the exporter has lowered her price, the tariff-inclusive price may not be higher than the prevailing price before the tariff was introduced. [more]
May 8, 2019
44
China's USD 12-trillion stock market is a vast and complicated panoply of different share types across a wide variety of markets, exchanges and share classes. With the rising role of A-shares amongst international emerging markets (EM) indices, understanding the market dynamics of China's equity markets will be increasingly critical, as Chinese equities are set to become an increasing proportion of the global opportunity set, driven by their increasing role in EM equities. Deutsche Bank’s research team looks at the distinguishing features of China's onshore and offshore markets. [more]
April 11, 2019
46
This edition reviews recent market moves and outlines Deutsche Bank Research's key views going forward. Read on for our recap of the global macro outlook, key recent/upcoming political developments (Brexit, trade war, EU politics etc.) and major risks in 2019. Also, find our views on the Fed, the ECB, and all major asset classes. [more]
April 4, 2019
Analyst:
48
April 1 marked an important milestone for China’s financial markets, as Chinese Yuan-denominated bonds are to be included in the Bloomberg Barclays Global Aggregate Bond Index. According to Bloomberg, the index will include over 360 eligible bonds, with a c.6% weight, making it the fourth-largest currency component in the index, after the USD, the EUR and the JPY, and the inclusion will take place over a 20-month period. [more]
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