A formal name, and a livelier one

The writer first steps back to a larger scene: the early 1990s, the end of the Soviet Union and of communist states in Eastern Europe, and a turn, in this telling, toward capitalism in many countries. Capitalism, the notes say, is still the most workable system they know, and also the source of many social problems—the worship of money, the gap between rich and poor, a thinning of the human. Firms of every kind have grown to chase profit; information-technology companies, the writer adds, now lead much of the world economy, with Apple and Microsoft named, and Samsung Electronics named as Korea’s first in sales and operating profit. That ranking is the writer’s, and is not treated here as an official total from a later year.

Against that backdrop the notes turn to firms that barely live. A marginal firm, 한계기업, is one that has lost its competitiveness and will struggle to grow; because it is kept going and revived with outside help, people also call it a zombie firm. In economic language, the notes say, a zombie company is one that cannot survive on its own and continues, like a zombie, only with help from the government or from banks. The writer is startled by a claim that there are already some thousands of them in the country. That count is the notes’, and is not recast as a later official total.

Interest cover, and seventy-three cases from 2005

There is no single clear test, the writer says, for calling a firm a zombie. What people often use is the interest-coverage ratio: the money a firm earns in a year, so-called operating profit, compared with the interest it must pay that year, or operating profit divided by interest expense. If the ratio is below one, a year’s earnings cannot even repay the interest on the loans.

Korea Ratings, the notes say, divided the causes of corporate distress into four: risk in management control, reckless expansion, chain bankruptcy, and weak sales. The finding comes from 73 firms that defaulted or entered rehabilitation or a workout in the ten years from 2005. The first mark, in this telling, is that control often changes; signs of distress showed up more where the organisation was unstable and dependence on executives or major shareholders was high. After a change of control, the notes describe a path through window-dressed accounts or breach of trust, weak results, new projects, a cash squeeze, and finally distress. Those 73 cases and that decade stay in the study’s window.

A short history the writer will not cut loose

Before coming to marginal firms, the notes retrace Korean companies after liberation: a free economy under the American military government, a brief boom, then a lack of industry and of daily goods, and aid from abroad. Serious reconstruction, the writer says, could begin only after the government of the Republic was established in 1948. The war of 1950 threw the economy into confusion again; after the fighting, heavy spending on recovery deepened inflation, and steel and machinery lagged while some consumer goods advanced.

A development economy, beginning under Park Chung-hee, then set targets, spent public money, and stepped into the market, including through five-year plans. Total output and growth rose, the notes say, the share of farming fell, and large firms grew on exports and foreign capital, even as dependence on the outside let national wealth leak away. The urgent task now, in this reading, is more balanced growth built around small and medium firms, rather than large firms that grew on privilege. A marginal firm, the writer insists, is not only one company’s trouble, but a question for the society around it. The same Korean report, at fuller length, is on CampusDown.

Sources

1. A student report on so-called zombie firms, which the notes also name marginal firms (한계기업).
2. The interest-coverage ratio, and 73 cases Korea Ratings read over ten years from 2005, left in that window.
3. A short history of Korean firms after 1948 and 1950, as the notes retell it, before the writer comes to distress.

Last updated: 14 November 2026