Analysis of companies' potential to become zombies within the framework of financial indicators: An application on the BIST-50 index

Global economic fluctuations, high inflation, financial crises, and market uncertainties negatively impact company operations; increasing financing costs, shrinking demand, and rising production expenses reduce the volume of business for firms. Government and financial institution support, however, makes the phenomenon of "zombie companies," which continue to operate despite being financially weak, more visible. This study examines the zombie company phenomenon within the framework of financial indicators and analyzes it empirically using firms in the BIST-50 index. The aim of the study is to determine the potential for companies to become zombies through their financial indicators. In the empirical part of the research, panel data analysis was performed using the financial data of BIST-50 firms, and the Generalized Method of Moments (GMM) was applied to account for the dynamic structure. The Altman Z-score was used as the dependent variable, while total debt/equity, accounts receivable turnover ratio, net sales/short-term debt, and various debt ratios were included in the model as independent variables. The findings show a strong correlation between the zombie company phenomenon and financial indicators. High debt levels, low profitability, and insufficient liquidity, in particular, increase the risk of firms becoming zombie companies. Consequently, it has been determined that zombie companies weaken financial sustainability and negatively affect the efficiency of resource allocation in the economic system. Therefore, developing financial and structural policies aimed at reducing zombie companies is of great importance.