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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title On-Site inspecting zombie lending
Organization Unit
  • Diana Bonfim
  • Geraldo Cerqueiro
  • Hans Degryse
  • Steven Ongena
Item Subtype Original Work
Refereed Yes
Status Published in final form
  • English
Journal Title Management Science
Publisher Institute for Operations Research and the Management Science
Geographical Reach international
ISSN 0025-1909
Volume 69
Number 5
Page Range 2547 - 3155
Date 2023
Abstract Text "Zombie lending" remains a widespread practice by banks around the world. In this paper, we exploit a series of large-scale on-site inspections made on the credit portfolios of several Portuguese banks to investigate how these inspections affect banks’ future lending decisions. We find that an inspected bank becomes 20% less likely to refinance zombie firms, immediately spurring their default. Overall, banks seemingly reduce zombie lending because the incentives to hold these loans disappear once they are forced to recognize losses.
Official URL
Digital Object Identifier 10.1287/mnsc.2022.4452
Other Identification Number merlin-id:22122
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