BIS Study Warns Zombie Firms in Emerging Asia Could Create Wider Financial Risks
The Bank for International Settlements (BIS) has published new research examining the growing presence of financially weak “zombie” companies in emerging Asian economies and the potential consequences for banks, investment and economic growth.
The BIS working paper, “Zombie firms in emerging Asia: domestic and cross border implications,” was published on September 3, 2026. The research examines firm-bank linked data covering 10 Asian emerging-market economies between 2005 and 2021.
Zombie firms generally refer to companies that remain in operation despite having persistent financial difficulties and limited ability to generate sufficient earnings to comfortably service their debt. Their continued survival can create challenges for healthier businesses by tying up financing and other economic resources.
The new BIS research looks beyond individual companies to examine how financial weakness can spread through relationships between firms and banks.
Banking Sector Faces Important Exposure
Banks have a direct interest in the financial health of their corporate borrowers. When lending remains concentrated among companies with weak financial positions, deterioration in business conditions can potentially increase credit risks for financial institutions.
The BIS study’s focus on firm-bank connections provides a closer look at this relationship across emerging Asian economies.
The research is particularly relevant because Asian emerging markets have become increasingly important contributors to global economic activity. Financial stress affecting companies in these economies can therefore have consequences beyond individual businesses or domestic markets.
Cross-Border Connections Add Another Dimension
The BIS research also examines the cross-border implications of zombie firms.
Modern financial systems are closely connected through international banking, investment and corporate relationships. As a result, financial weakness in one market can potentially affect institutions or businesses operating in other countries.
Understanding these connections can help policymakers and financial supervisors identify vulnerabilities before they develop into broader problems.
Why the Research Matters Now
The publication comes as central banks and financial regulators continue monitoring risks created by changing interest-rate conditions, corporate debt and evolving financial markets.
The BIS has recently highlighted several pressures facing the global financial system, including financial vulnerabilities, inflation risks and questions surrounding the sustainability of investment linked to artificial intelligence.
The institution’s latest research therefore adds another piece to the broader discussion about financial stability and the resilience of banks and businesses.
The BIS says its working papers are research contributions and do not necessarily represent the views of the institution or its member central banks. Nevertheless, the new analysis provides policymakers with additional evidence for assessing how corporate financial weakness can interact with domestic and international banking systems.
