Preprint / Version 1

Retail’s Living Dead: How Zombie Firms Threaten the U.S. Economy

##article.authors##

  • Caroline Liu Clements High School

DOI:

https://doi.org/10.58445/rars.2875

Keywords:

Zombie Firms, American retail sector

Abstract

Since Covid-19, the American retail sector has undergone a dramatic transformation, leading to widespread store closures, shifting consumer spending habits, and exposing lagging retailers at high risks of bankruptcy. Amid these challenges, a growing number of traditional brick-and-mortar retailers have continued to operate owing to government support and access to inexpensive credit. These struggling retail corporations are what economists refer to as “zombie firms”–a term first coined by Kane in 1989–businesses that have failed to cover their debt obligations due to a lack of profit. Once iconic department stores and chain retailers, such as Sears and Bed Bath & Beyond (BBBY), continue to operate despite persistent financial underperformance. This phenomenon stems from a variety of problems from years before, including misallocated capital and delayed market corrections. As the U.S. retail landscape continues to grapple with post-pandemic recovery, understanding the causes and consequences of zombie firms is critical. This paper investigates how financial, structural, and policy factors contribute to zombie retail firms and explores the potential harm to American commerce if these companies continue.

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Posted

2025-08-04