The Unholy Trinity: Regulatory Forbearance, Stressed Banks and Zombie Firms

Chari, Anusha; Jain, Lakshita; Kulkarni, Nirupama

doi:10.2139/ssrn.3781322

Cited by 7 publications

(9 citation statements)

References 26 publications

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“…Moreover, credit misallocation might give rise to a large presence of zombie-i.e., unviable-firms, which can be a barrier to the entry and growth of other firms. This phenomenon has been shown not only for Japan (Caballero, Hoshi, and Kashyap 2008), and other OECD countries (McGowan, Andrews, and Millot 2017), but also in the case of India (Chari, Jain, and Kulkarni 2021).…”

Section: Introductionmentioning

confidence: 80%

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India’s Banks: Lending to Productive Firms?

Kirti¹,

Peria²,

George³

et al. 2022

IMF Working Papers

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Section: Introductionmentioning

confidence: 80%

“…5 See Notes on Tables at https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications#!4. 6 SeeChari, Jain, and Kulkarni (2021) and Ghosh, Narayanan and Garg (2021) for examples of other work matching Prowess and RBI based on bank names.…”

mentioning

confidence: 99%

India’s Banks: Lending to Productive Firms?

Kirti¹,

Peria²,

George³

et al. 2022

IMF Working Papers

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“…The pre-existing banks' overly optimistic expectations of corporate profits have caused zombie firms (Zhu et al 2019). (iii) Regulatory forbearance towards banks may lead to an increase in zombie lending practices (Chari et al 2021). Second, excessive government intervention.…”

Section: Literature Reviewmentioning

confidence: 99%

The effects of green credit policy on the formation of zombie firms: evidence from Chinese listed firms

Chen

2022

Environ Sci Pollut Res

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This paper examines the effects of the green credit policy on forming three types of "zombie firms," namely, credit-subsidized zombie firms, poorly managed zombie firms, and comprehensive zombie firms, considering the quasi-natural experiment of the implementation of the "Green Credit Guidelines" in 2004. In this paper, I implement a difference-in-differences method and use the data of all Chinese A-share non-financial listed companies from 2008 to 2017. The results show that the green credit policy attempts to inhibit the formation of credit-subsidized zombie firms by reducing bank loan subsidies and evergreen lending. However, the green credit policy promotes poorly managed zombie firms by strengthening firms' financial constraints and reducing the working capital and investment efficiency. The green credit policy has not shown a significant impact on comprehensive zombie firms. Moreover, the green credit policy has shown a more significant impact on state-owned firms, firms in industries that heavily rely on external financing and are highly competitive, and firms involved in high financial marketization areas.

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“…A related aspect that has gained attention when corporations accumulate debt is the macroeconomic consequences of decisions at the micro level, especially when governments are involved (Banerjee and Hofmann, 2020;Brunnermeier and Krishnamurthy, 2020;Cevik and Miryugin, 2020;Demmou et al, 2021;Reinhart, 2021). High debt accumulated during crises can lead to the emergence of zombie firms, low aggregate investment, and debt overhang (Caballero et al, 2008;Schivardi et al, 2017;Kalemli-Ozcan et al, 2019;Xiao, 2020;Chari et al, 2021). But public programs can also reduce bankruptcies and firm failures (Carletti et al, 2020;Demmou et al, 2020;Díez et al, 2021;Cros et al, 2021;Gourinchas et al, 2021).…”

Section: Contribution To the Literaturementioning

confidence: 99%

The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk

Huneeus¹,

Kaboski²,

Larraín³

et al. 2022

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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The Unholy Trinity: Regulatory Forbearance, Stressed Banks and Zombie Firms

Cited by 7 publications

References 26 publications

India’s Banks: Lending to Productive Firms?

India’s Banks: Lending to Productive Firms?

The effects of green credit policy on the formation of zombie firms: evidence from Chinese listed firms

The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk

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