1. Introduction

In a context where international institutions and regulatory boards have developed strict standards in response to distortion and fraud standards that are regarded as one of the fundamental bases for information disclosure in the financial reporting of companies active in capital markets the widespread emergence of firms with “zombie-like” characteristics has become a growing concern. These entities, often possessing hidden cognitive structures shaped by strategic market conditions and the absence of adequate standards, have significantly amplified conflicts of interest arising from a lack of informational transparency. Consequently, the organizational structures of zombie-type companies, which are rapidly expanding across the operational landscape of financial markets, have created opportunities for such firms to distort financial transparency and divert sourced funds away from sustainable corporate development and stakeholder-oriented goals. Instead, they often channel these resources into self-serving investment activities, the consequences of which exacerbated by the lack of effective institutional oversight frequently result in the violation of stakeholder rights.

2. Methodology

The nature of this study, in terms of its outcome, can be classified as developmental research. Although references to previous scholarly experiences in the theoretical foundations indicate that researchers have focused on examining the phenomenon of corporate zombification in recent years, a review of their findings shows that there is still insufficient integrated and conceptual understanding of this phenomenon. Consequently, the existing theoretical frameworks cannot be fully relied upon to evaluate the zombification of companies in the Iranian capital market. Therefore, the theoretical dispersion identified in prior studies provides a justifiable basis for employing a systematic content screening process in this research, with the aim of further developing the theoretical understanding of corporate zombification within the Iranian capital market and facilitating analytical evaluation. In terms of purpose, this study can be considered descriptive, as there is currently no comprehensive understanding of how financial reporting practices can contribute to reducing the negative consequences associated with zombie firms. Accordingly, this research may serve as a foundation for gaining a clearer understanding of the functions and effective approaches of financial reporting in mitigating the emergence of such firms. With respect to the type of data, the study adopts a mixed-methods approach. In the qualitative phase, factors contributing to corporate zombification identified in previous studies are systematically screened and extracted. Subsequently, in the quantitative phase, by integrating the criteria derived from the two core domains of the study financial reporting styles and corporate zombification in the capital market an attempt is made to determine, through a fuzzy approach and dual-membership matrix analysis, the most central financial reporting style that can contribute to reducing the presence of zombie firms in the capital market. Finally, by integrating the objectives of both phases, the study proposes a strategic roadmap for policymaking. This is achieved through the development of a reference matrix based on a vertical axis representing the most central dimension of effective financial reporting and a horizontal axis representing the most influential context contributing to the zombification of business firms. Such a framework enables the identification of disclosure aspects that can play a significant role in reducing the prevalence of zombie firms in the Iranian capital market.

4. Result

The evaluations based on the ‘Q_i’ criterion in the intuitionistic fuzzy VIKOR process indicate that the “Paranoid Reporting Style ‘⟨[Z₁]’ represents the most significant reference criterion exerting a mitigating effect on the context of long-term debt accumulation ‘⟨[V₃]⟩’. This factor can therefore be regarded as a barrier to the expansion of zombie firms within the Iranian capital market. In other words, this finding suggests that the normative development of the Paranoid Reporting Style ‘⟨[Z₁]⟩’ in the capital market enhances the comprehensive disclosure capacity of negative information and, consequently, reduces long-term debt accumulation ‘⟨[V₃]⟩’ as a key contributing factor to the zombification of business firms. Furthermore, in order to develop a final interpretative framework integrating the two identified core criteria namely, Paranoid Reporting as the pivotal dimension of effective reporting and long-term debt accumulation as the influential context of corporate zombification a Strategic Reference Points (SRP) matrix framework is employed. Through this mechanism, two axes, vertical “X” and horizontal “Y,” are constructed to formulate a strategic roadmap clarifying the extent to which the Paranoid Reporting Style contributes to reducing corporate zombification. To this end, a ‘2×2’matrix is initially defined as y→x⟹‖⌈y_1→x_1∥y_1→x_2∥y_2→x_1∥y_2→x_2 ⌉‖where “Y,” as the horizontal axis, represents the context of “long-term debt accumulation” as a determinant of corporate zombification, measured across two scales: “inefficiency due to non-affiliated financial policies ⟨y₁⟩” and “inefficiency due to affiliated financial policies ⟨y₂⟩.” On the other hand, “X,” as the vertical axis, represents the “Paranoid Reporting Style,” measured across two scales: “non-reflection of positive news ⟨x₁⟩” and “direct disclosure of negative news ⟨x₂⟩.” These dimensions form the initial construct of the strategic roadmap for differentiating types of zombie firms. It should be noted that these scales are expanded according to the substantive nature of the two core domains of the study within the preliminary framework of strategic reference points.

5. Conclusion

In interpreting the obtained result, the accumulation of long term debt should first be considered as a negative functional shadow over business firms. Over time, and due to various factors ranging from financial market conditions to limited managerial capabilities and technical expertise the level of inefficiency in resource management and optimal allocation to strategic projects and corporate programs tends to increase. This situation gradually leads firms toward greater dependence on external financing through various channels. However, as previously noted, the ineffectiveness in generating sufficient operating revenues increases the risk associated with servicing long term debts, making it difficult for firms to meet their repayment obligations on time.

Under such circumstances, the imbalance of allocable resources tends to intensify, while production productivity simultaneously declines. This combination places firms under significant pressure in fulfilling their debt commitments. In order to maintain their presence and continuity within the capital market, such firms often resort to obtaining additional financial facilities to compensate for insufficient realized operating income. Eventually, due to growing financial incapacity, these companies face increasing restrictions imposed by creditors and financial institutions. This point can be regarded as the beginning of the zombification process within the business cycle of the capital market. At this stage, governments particularly in developing economies such as Iran that operate under economic sanctions and structural pressures may shift from the role of a market steward to that of an active supporter, intervening to maintain minimal liquidity circulation across industries. Consequently, by invoking their inherent responsibility to preserve market functionality, governments may effectively become rescuers of heavily indebted firms.