Zombie-Lending in the United States: Prevalence versus Relevance

Maximilian Göbel and Nuno Tavares

No 2022/0231, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: Extraordinary fiscal and monetary interventions in response to the COVID-19 pandemic have revived concerns about zombie prevalence in advanced economies. The literature has al- ready linked this phenomenon - observed over the course of the last two decades - to impeding the performance of healthy firms in Japan and Europe. To make the case for the United States, we analyze banks' and capital markets' zombie-lending practices on the basis of a sample of publicly listed U.S. companies. Our results suggest that zombie prevalence and zombie-lending per se are not a defining characteristic of the U.S. economy. Nevertheless, we find evidence for negative spillovers of zombie-lending on productivity, capital-growth, and employment-growth of non-zombies as well as on overall business dynamism. It is predominantly the class of healthy small- and medium-sized companies that is sensitive to zombie-lending activities, with financial constraints further amplifying these effects.

Keywords: zombie lending; business dynamism; bank credit; non-viable firms; productivity (search for similar items in EconPapers)
JEL-codes: D24 E24 G21 L25 O40 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-ban, nep-eff, nep-mac and nep-sbm
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Working Paper: Zombie-Lending in the United States -- Prevalence versus Relevance (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp02312022

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