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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title On-Site Inspecting Zombie Lending
Organization Unit
Authors
  • Diana Bonfim
  • Geraldo Cerqueiro
  • Hans Degryse
  • Steven Ongena
Item Subtype Original Work
Refereed Yes
Status Published electronically before print/final form (Epub ahead of print)
Language
  • English
Journal Title Management Science
Geographical Reach international
Volume forthcoming
Page Range 1 - 21
Date 2022
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.
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Official URL https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2022.4452
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Digital Object Identifier 10.1287/mnsc.2022.4452
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