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Identifying the Real Effects of Zombie Lending

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  • Schivardi, Fabiano
  • Sette, Enrico
  • Tabellini, Guido

Abstract

Several papers study the real effects of zombie lending based on regressions showing that the performance of healthy firms relative to zombie firms deteriorates as the fraction of zombie firms increases. This finding is interpreted as evidence of a negative spillover from zombies to healthy firms. We argue that this commonly used approach faces a serious identification problem. Under general conditions on the distribution of firm performance, the deterioration of the relative performance of healthy firms is a mechanical consequence of an increase in the fraction of zombies and cannot be interpreted as evidence of negative spillovers.

Suggested Citation

  • Schivardi, Fabiano & Sette, Enrico & Tabellini, Guido, 2020. "Identifying the Real Effects of Zombie Lending," CEPR Discussion Papers 14758, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14758
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    1. Ana Fontoura Gouveia & Christian Osterhold, 2018. "Fear the walking dead: Zombie firms, spillovers and exit barriers," OECD Productivity Working Papers 13, OECD Publishing.
    2. Gareth Anderson & Rebecca Riley & Garry Young, 2019. "Distressed Banks, Distorted Decisions?," National Institute of Economic and Social Research (NIESR) Discussion Papers 503, National Institute of Economic and Social Research.
    3. Laura Blattner & Luisa Farinha & Francisca Rebelo, 2017. "When Losses Turn Into Loans: The Cost of Undercapitalized Banks," 2017 Papers pbl215, Job Market Papers.
    4. Viral V. Acharya & Matteo Crosignani & Tim Eisert & Christian Eufinger, 2024. "Zombie Credit and (Dis‐)Inflation: Evidence from Europe," Journal of Finance, American Finance Association, vol. 79(3), pages 1883-1929, June.
    5. Reinhart, Carmen M. & Rogoff, Kenneth S., 2013. "Banking crises: An equal opportunity menace," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4557-4573.
    6. Christian Osterhold, 2018. "Fear the walking dead: zombie firms, spillovers and exit barriers," Working Papers w201811, Banco de Portugal, Economics and Research Department.
    7. Müge Adalet McGowan & Dan Andrews & Valentine Millot & Thorsten BeckManaging Editor, 2018. "The walking dead? Zombie firms and productivity performance in OECD countries," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(96), pages 685-736.
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    More about this item

    Keywords

    Zombie lending; Capital misallocation;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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