Do South African Public Universities Exhibit Zombie-Like Characteristics? An Empirical Analysis of Financial Sustainability Concerns
Keywords:
Capital Adequacy; financial distress; Higher Education; South African universities; Zombie UniversitiesAbstract
Objective: This paper discusses whether South African public universities resemble zombie institutions characteristics? That is, institutions that are still operating, in spite of financial stress and have poor economic health. Approach: The research utilizes panel data on 19 public universities to measure persistent financial distress. The research considers the main institutional variables like capital adequacy, size, age, cash payout capacity, and growth to test their influence on loss persistence using ordinary least squares (OLS) with robust standard errors. Results: The results indicate that age of the university is a major factor in determining the losses. Study underscores that persistent losses are observed in younger universities, and less in older universities, which indicates that maturity and experience contribute to the increase of financial stability and the decrease of the probability of zombie-like behavior. On the contrary, capital adequacy demonstrates a weak positive correlation with persistent losses, whereas such variables as the institutional size, the cash payout capacity, and growth do not have statistically significant impact on university losses. It suggests that being larger or growing does not always imply improved financial health of the public university. Implications: The research indicates that organizational maturity is a major determinant in minimizing the long-term financial distress, and that university size does not guarantee the sustainability. Novelty: Applying the notion of zombie institutions to the higher education sector in South Africa, the current study contributes to the existing research and provides valuable information to policymakers who aim to improve the financial stability and sustainability of South African universities.
References
Acharya, V. V., Eisert, T., Eufinger, C., & Hirsch, C. (2019). Whatever it takes: The real effects of unconventional monetary policy. Review of Financial Studies, 32(9), 3366–3411.
Adalet McGowan, M., Andrews, D., & Millot, V. (2018). The walking dead? Zombie firms and productivity performance in OECD countries. Economic Policy, 33(96), 685-736.
Alshubiri, F. N. (2021). Analysis of financial sustainability indicators of higher education institutions on foreign direct investment: Empirical evidence in OECD countries. International Journal of Sustainability in Higher Education, 22(1), 77-99.https://doi.org/10.1108/IJSHE-10-2019-0306
Altbach, P. G., Reisberg, L., & Rumbley, L. E. (2009). Trends in global higher education: Tracking an academic revolution. UNESCO.
Altbach, P. G., Reisberg, L., & Rumbley, L. E. (2010). Tracking a global academic revolution. Change: The Magazine of Higher Learning, 42(2), 30-39. https://doi.org/10.1080/00091381003590845
Argote, L., & Miron-Spektor, E. (2011). Organizational learning: From experience to knowledge. Organization science, 22(5), 1123-1137. https://doi.org/10.1287/orsc.1100.0621
Baltagi, B. H. (2021). Econometric Analysis of Panel Data (6th ed.). Springer
Banerjee, R., & Hofmann, B. (2018). The Rise of Zombie Firms: Causes and Consequences. BIS Quarterly Review. SSRN: https://ssrn.com/abstract=3288098
Banerjee, R., & Hofmann, B. (2022). Corporate zombies: Anatomy and life cycle. Economic Policy, 37(112), 757-803. https://doi.org/10.1093/epolic/eiac027
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108
Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2005). Financial and legal constraints to growth: Does firm size matter? The Journal of Finance, 60(1), 137–177. https://doi.org/10.1111/j.1540-6261.2005.00727.x
Berger, A. N., Herring, R. J., & Szegö, G. P. (1995). The role of capital in financial institutions. Journal of Banking & Finance, 19(3–4), 393–430.
Bowman, J. (2024). The Working Dead: The dynamics, causes and consequences of zombie businesses. https://doi.org/10.25911/R2PJ-FF97
Byiers, B., Cazals, A., Medinilla, A., & de Melo, J. (2021). African regional integration: A problem-driven approach to delivering regional public goods. https://hal.science/hal-03247039/
Caballero, R. J., Hoshi, T., & Kashyap, A. K. (2008). Zombie lending and depressed restructuring in Japan. American economic review, 98(5), 1943-1977. https://doi.org/10.1257/aer.98.5.1943
Chandler, A. D. (1990). Scale and Scope: The Dynamics of Industrial Capitalism. Harvard University Press.
Cloete, N., & Bunting, I. (2020). Higher Education Systems and Institutions, South Africa. In P. N. Teixeira & J. C. Shin, (eds.), The International Encyclopedia of Higher Education Systems and Institutions. Springer. https://doi.org/10.1007/978-94-017-8905-9_471
Cloete, N., & Maassen, P. (2015). Roles of universities and the African context. Knowledge production and contradictory functions in African higher education, 1.
Cohn, E., Rhine, S. L., & Santos, M. C. (1989). Institutions of higher education as multi-product firms: Economies of scale and scope. The review of economics and statistics, 284-290. https://doi.org/10.2307/1926974
Creswell, J. W., & Creswell, J. D. (2018). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (5th ed.). Sage.
Damodaran, A. (2015). Applied corporate finance (4th ed.). Wiley.
DeAngelo, H., & Roll, R. (2015). How stable are corporate capital structures? The Journal of Finance, 70(1), 373-418. https://doi.org/10.1111/jofi.12163
Delmar, F., Davidsson, P., & Gartner, W. B. (2003). Arriving at the high-growth firm. Journal of business venturing, 18(2), 189-216. https://doi.org/10.1016/S0883-9026(02)00080-0
Fontoura Gouveia, A., & Osterhold, C. (2018). Fear the walking dead: Zombie firms, spillovers and exit barriers. OECD Productivity Working Papers, No. 13.
Fukuda, S., & Nakamura, J. (2011). Why did “Zombie” firms recover in Japan? The World Economy. https://doi.org/10.1111/j.1467-9701.2011.01368.x
Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (5th ed.). McGraw-Hill.
Hair, J. F., Black, W., Babin, B., & Anderson, R. (2019). Multivariate Data Analysis (8th ed.). Cengage.
Higher Education Trends. (2025). Deloitte Insights: A look at the challenges and opportunities shaping America’s higher education sector. https://www.deloitte.com/us/en/insights/industry/articles-on-higher-education/2025-us-higher-education-trends.html
Jansen, J. D. (2023). Corrupted: A study of chronic dysfunction in South African universities. Wits University Press.
Johnes, G. (1997). Costs and industrial structure in contemporary British higher education. The Economic Journal, 107(442), 727-737.
Johnes, G., & Johnes, J. (2016). Costs, efficiency, and economies of scale and scope in the English higher education sector. Oxford Review of Economic Policy, 32(4), 596-614. https://doi.org/10.1093/oxrep/grw023
Johnstone, D. B. (2004). The economics and politics of cost sharing in higher education: comparative perspectives. Economics of education review, 23(4), 403-410.
Jokipii, T., & Milne, A. (2011). Bank capital buffer and risk adjustment decisions. Journal of Financial Stability, 7(3), 165-178. https://doi.org/10.1016/j.jfs.2010.02.002
Jovanovic, B. (1982). Selection and the evolution of industry. Econometrica, 50(3), 649–670.https://doi.org/10.2307/1912606
Khumalo, L. M., & Schutte, D. (2025). An analysis of the financial sustainability of public universities in South Africa. Theory Methodology Practice: Club Of Economics In Miskolc, 21(1), 21-36.
Lester, D. L., Parnell, J. A., & Carraher, S. (2003). Organizational life cycle: A five‐stage empirical scale. The international journal of organizational analysis, 11(4), 339-354. https://doi.org/10.1108/eb028979
Levitt, B., & March, J. G. (1988). Organizational learning. Annual review of sociology, 14(1), 319-338. https://doi.org/10.1146/annurev.so.14.080188.001535
Mabuza, N. H. (2020). Dropout causes of students funded by the national student financial aid scheme in South African universities. University of South Africa (South Africa).
Maimane. (2025). NSFAS on tuition and student accommodation PMG. https://pmg.org.za/committee-meeting/41825/
Massy, W. F. (2016). Reengineering the university: How to be mission centered, market smart, and margin conscious. Johns Hopkins University Press. Reengineering the University: How To Be Mission Centered, Market Smart, and Margin Conscious - ProQuest.
Massy, W. F. (2016). Reengineering the university: How to be mission centered, market smart, and margin conscious. JHU Press.
Matlala, K. (2022). The State’s Responsibility to Support Indebted Final Year Health Sciences Students in South Africa. Master’s thesis, University of the Witwatersrand, Johannesburg (South Africa).
McGowan, M. A., Andrews, D., & Millot, V. (2017). The walking dead? Zombie firms and productivity performance in OECD countries. OECD Economics Department Working Papers No. 1372. https://doi.org/10.1093/epolic/eiy012
Mlambo, V. H., & Mpanza, S. (2024). Exploring the Challenges of Higher Education in South Africa: A Comprehensive Literature Review. Alustath Journal For Human And Social Sciences, 63, 22-40. https://doi.org/10.36473/ujhss.v62i4.2261
Mutongoza, B. H. (2025). Nothing but noise: Challenges impeding the transformation of higher education in South Africa. Interdisciplinary Journal of Education Research, 7(1), a06-a06. https://doi.org/10.38140/ijer-2025.vol7.1.06
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics, 13(2), 187-221. https://doi.org/10.1016/0304-405X(84)90023-0
Naimo, F. A., & Ogbeide, S. O. (2022). Evidences and Determinants of Zombie Firms: Implication on Economic Growth. Management and Economics Review, 7(2), 141-158.
Ogundu, J. (2022). Engineering and operations management education as the anchor to building, operating, managing, maintaining and sustaining good infrastructures, facilities and amenities in Nigerian universities. In 3rd African International Conference on Industrial Engineering and Operations Management, Nsukka, Nigeria (Vol. 2, No. 5, pp. 1-19).
Panzar, J. C., & Willig, R. D. (1977). Economies of scale in multi-output production. The Quarterly Journal of Economics, 91(3), 481-493.
Penrose, E. (1959). The theory of the growth of the firm. Oxford University Press.
Peteraf, M. A. (1993). The cornerstones of competitive advantage: a resource‐based view. Strategic management journal, 14(3), 179-191. https://doi.org/10.1002/smj.4250140303
Peters, A. A. (2013). Building human capital for sustainable development: Role of the university. Administrative Staff College of Nigeria.
Pollard, C. (2022). Debt (re) considered: an exploration of shame, bankruptcy, and financial resilience. Master’s thesis, Northern Arizona University.
Rammbuda, M. C., & Mudau, T. S. (2025). South Africa’s Student Accommodation Crisis: A Growing Problem at Major Universities. Journal of Education and Science of Teaching, 1(1), 1-13. https://hdl.handle.net/10520/ejc-joest_v1_n1_a2
SAnews. (2023) More South Africans in higher education. https://www.sanews.gov.za/south-africa/more-south-africans-higher-education
Sarıgül, S. S., & Avcı, P. (2024). The Role and Impact of Zombie Firms in the Economic System: An Examination of Financial Sustainability and Innovation. UluslararasıYönetimAkademisi Dergisi, 7(3), 894-905. https://doi.org/10.33712/mana.1556394
Sebola, M. P. (2023). South Africa’s public higher education institutions, university research outputs, and contribution to national human capital. Human Resource Development International, 26(2), 217–231. https://doi.org/10.1080/13678868.2022.2047147
Shattock, M. (2010). EBOOK: Managing successful universities. McGraw-Hill Education.
Shrivastava, M., & Shrivastava, S. (2014). Political economy of higher education: comparing South Africa to trends in the world. Higher Education, 67(6), 809-822.
Srinivas, V., Sharma, S., Mohapatra, N., & Madhavedi, S. (2023). A descriptive study of salient features of New Education Policy 2020 and its impact of education. European Economic Letters, 13(3), 2003–2009. https://doi.org/10.52783/eel.v13i3.608
UCT in 2018. (2019, January 24). UCT News. https://www.news.uct.ac.za/article/-2019-01-24-uct-in-2018
Upadhyay, A. P., & Baag, P. K. (2024). Surviving beyond expiry: a systematic literature review of zombie firms. China Accounting and Finance Review, 26(1), 31-54. https://doi.org/10.1108/CAFR-05-2023-0054
Walwyn, D., & Cloete, L. (2016). Universities are becoming major players in the national system of innovation. South African Journal of Science, 112(7-8), 1-8. https://doi.org/10.17159/sajs.2016/20150358
Whelan, A., Walker, R., & Moore, C. (2013). Zombies in the academy: Living death in higher education. Intellect.
Wooldridge, J. M. (2019). Introductory Econometrics: A Modern Approach (7th ed.). Cengage.
Yende, S. J. (2024). Challenges faced by National Student Financial Aid Scheme (NSFAS) graduates in repaying loans and debt: A content analysis. African Journal of Inter/Multidisciplinary Studies, 6(1), 1-13.
Zhu, H., He, F., Wang, S., Ye, Q., & Liang, C. (2019). Zombie firms and debt accumulation: A theoretical framework and Chinese experience. China & World Economy, 27(6), 104-126. https://doi.org/10.1111/cwe.12298
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Rajendra Rajaram
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
