Logo eprints

Machine Learning for Zombie Hunting. Firms’ Failures and Financial Constraints.

Bargagli-Stoffi, Falco J. and Riccaboni, Massimo and Rungi, Armando Machine Learning for Zombie Hunting. Firms’ Failures and Financial Constraints. EIC working paper series #1/2020/2020 ISSN 2279-6894.

[img] PDF - Published Version
Available under License Creative Commons Attribution Non-commercial.

Download (2MB)


In this contribution, we exploit machine learning techniques to predict the risk of failure of firms. Then, we propose an empirical definition of zombies as firms that persist in a status of high risk, beyond the highest decile, after which we observe that the chances to transit to lower risk are minimal. We implement a Bayesian Additive Regression Tree with Missing Incorporated in Attributes (BART-MIA), which is specifically useful in our setting as we provide evidence that patterns of undisclosed accounts correlate with firms’ failures. After training our algorithm on 304,906 firms active in Italy in the period 2008-2017, we show how it outperforms proxy models like the Z-scores and the Distance-to-Default, traditional econometric methods, and other widely used machine learning techniques. We document that zombies are on average 21% less productive, 76% smaller, and they increased in times of financial crisis. In general, we argue that our application helps in the design of evidence-based policies in the presence of market failures, for example optimal bankruptcy laws. We believe our framework can help to inform the design of support programs for highly distressed firms after the recent pandemic crisis.

Item Type: Working Paper (EIC working paper series)
Uncontrolled Keywords: Keywords: machine learning; Bayesian statistical learning; financial constraints; bankruptcy; zombie firms JEL Codes: C53; C55; G32; G33; L21; L25
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HG Finance
Research Area: Economics and Institutional Change
Depositing User: Caterina Tangheroni
Date Deposited: 15 Jun 2020 11:52
Last Modified: 15 Jun 2020 12:06
URI: http://eprints.imtlucca.it/id/eprint/4077

Actions (login required)

Edit Item Edit Item