Bank Specialization and Zombie Lending

Olivier De Jonghe, Klaas Mulier and Ilia Samarin ()
Additional contact information
Ilia Samarin: Research Department, National Bank of Belgium, 1000 Brussels, Belgium

Management Science, 2025, vol. 71, issue 2, 1260-1286

Abstract: We study whether banks internalize congestion externalities when lending to zombie firms. We conjecture that banks should be better informed about the presence of zombie firms and the congestion externalities that such firms exert on healthy borrowers in industries where banks are specialized and show that banks’ credit supply to zombie firms relates negatively to their industry specialization. This relation is stronger when congestion externalities are likely to have stronger adverse effects, namely when zombie firms take a higher fraction of resources in the industry or when the industry is geographically more concentrated. Additionally, this relation is weaker in industries with higher asset specificity as zombie firms’ default (and potential asset fire sales) could reduce healthy borrowers’ collateral value.

Keywords: credit misallocation; zombie lending; bank specialization; soft industry information (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2023.01437 (application/pdf)

Related works:
Working Paper: Bank specialization and zombie lending (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:2:p:1260-1286

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().