Impact of zombie companies on governance and financial performance of the manufacturing industry during COVID-19

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Abstract

In Vietnam, after the COVID-19 period, zombie companies increased and negatively affected the economy, making it difficult for the state to make appropriate policies (Caballero et al., 2008). The purpose of this research is to find out the factors that affect the possibility of becoming a zombie company and how the manufacturing enterprises themselves affect the performance of enterprises in the industry. The research sample includes 41 zombie companies and 479 other normal companies in the manufacturing industry listed on the Vietnamese stock market from 2017–2021. Analysis results show that factors that reflect financial performance including liquidity, capital efficiency, and profitability of zombie companies are lower than healthy companies and the differences are all significant. Regression analysis using Stata shows that zombie companies have a negative impact on the financial performance of manufacturing companies on the stock market. From the results of empirical research, the study has made a number of policy recommendations to minimize the negative impact of zombie companies on the overall performance of the industry and the economy.

Keywords: Listed Companies, Manufacturing Industry, Zombie Companies

Authors’ individual contribution: Conceptualization — T.K.P.N.; Methodology — T.L.T.N.; Validation — T.K.P.N.; Writing — Review & Editing — T.K.P.N., T.L.T.N., and D.L.N.; Visualization — T.K.P.N.; Supervision — T.L.T.N.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G3, M4

Received: 08.03.2024
Revised: 07.06.2024; 08.07.2024; 27.03.2025
Accepted: 28.04.2025
Published online: 30.04.2025

How to cite this paper: Nguyen, T. K. P., Nguyen, T. L. T., & Nguyen, D. L. (2025). Impact of zombie companies on governance and financial performance of the manufacturing industry during COVID-19. Journal of Governance & Regulation, 14(2), 145–154. https://doi.org/10.22495/jgrv14i2art15