Identifying the Real Effects of Zombie Lending

Fabiano Schivardi, Enrico Sette and Guido Tabellini

No 14758, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Zombie lending; Capital misallocation (search for similar items in EconPapers)
JEL-codes: E44 G21 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-cfn and nep-mac
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Citations: View citations in EconPapers (36)

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