Bank specialization and zombie lending

Olivier De Jonghe, Klaas Mulier and Ilia Samarin ()
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Ilia Samarin: National Bank of Belgium and Ghent University

No 404, Working Paper Research from National Bank of Belgium

Abstract: Bank specialization leads to expertise, including knowledge on zombie borrowers and the negative impact they exert on healthy borrowers. This induces specialized banks to reduce zombie lending. The reduction in zombie lending is larger when the scope and opportunity cost of negative spillovers to healthy borrowers is larger; namely, when the fraction of sectoral labor stuck in zombie firms is larger or when the sector is expected to grow faster. Additionally, specialized banks reduce zombie lending less in sectors with higher asset specificity, as zombie firms’ default (and potential asset fire sales) could trigger reductions in healthy borrowers’ collateral values.

Keywords: Credit; misallocationZombie; lendingBank; specializationSoft; information (search for similar items in EconPapers)
JEL-codes: G21 G3 L22 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021-11
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Bank Specialization and Zombie Lending (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:202111-404

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