The Zombie Pattern: Why the Count Always Arrives Late — and Short

On August 9, Korea's Construction & Economy Research Institute (CERIK) published its structural review of externally audited construction companies. Every headline that followed carried the same number: marginal firms had roughly tripled in five years, from 62 in 2021 to 173 in 2025 — from 4.5% of the sector to 11.3%.

The number is real. What is worth pausing on is how the sample was built.

CERIK started with 2,337 construction firms for which five years of financial statements were available. It then excluded 333 companies that entered capital impairment during the period, and analysed the remaining 2,004 — 1,099 general contractors and 905 specialty contractors. This is a defensible methodological choice: ratio analysis breaks down when equity goes negative, and leaving those firms in would distort every average in the study.

But it has a consequence that does not survive the trip into a headline. The group that deteriorated most severely left the frame before the counting began. Whatever the report says about the pace of decline is therefore a floor, not a ceiling.

What reinvestment intensity actually measures

The Reinvestment Intensity Index does not ask how much a company spent. It asks whether resources are being formed — and the constraint on next year's reinvestment is rarely willingness. It is return velocity: how quickly cash that has already gone out comes back.

CERIK's activity ratios are where that shows up. Total asset turnover fell from 149.4% in 2022 to 114.7% in 2025. Receivables turnover across the sector slipped from the 900% range in 2021–2022 into the 800% range for 2023–2025; among specialty contractors specifically, from 917.2% to 834.5%. Over the same window revenue growth went from 17.9% in 2022 to −4.5% last year, and the current ratio fell from 282.6% to 238.3%. CERIK's own diagnosis is explicit: as collection periods on construction receivables lengthen, operating cash flow and liquidity strain rise together.

Note the sequencing problem. "Marginal firm" is defined as interest coverage below 1 for three consecutive years. The label cannot be applied until the third year — it is a description of a completed past, not a live reading. Turnover ratios recalculate every quarter. The 173 figure for 2025 is, by construction, a receipt for conditions that were already in place around 2023.

The count is a product of the filter

The United States offers a useful control, not on level but on method. In a Federal Reserve FEDS Note, economists Giovanni Favara, Camelia Minoiu and Ander Perez-Orive applied their own zombie filters to U.S. data and identified roughly 10% of public firms and 5% of private firms as zombies over 2015–2019. Their headline conclusion was that zombie firms are not a prominent feature of the U.S. economy — few in number, generally small, concentrated in manufacturing and retail, and accounting for a small share of total credit to nonfinancial firms.

They also stated plainly that their filters identify a lower share of zombie firms than is generally reported by the financial press and the academic literature.

That is the point worth carrying. Korea's 11.3% and the Fed's 10% are not the same measurement wearing two flags. They are two different filters that happen to share a name — different populations, different definitions, different exclusions. Whoever sets the frame sets the count.

Korea parallel

RaymondsIndex reads reinvestment intensity across Korean issuers on a quarterly cadence precisely because annual labels arrive after the fact. The question is not whether a company has been flagged. It is whether the interval between cash going out and cash coming back is lengthening — and whether that lengthening is accelerating.

For an individual investor, the practical version is smaller than it sounds. When a screener shows an interest coverage ratio, it is showing a three-year verdict. The quarterly series sitting next to it — asset turnover, receivables turnover — is showing the sentence being written.

This is a general structural observation based on published research and disclosures, not investment advice.

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