The Zombie Lending Channel of Monetary Policy

Albuquerque, Bruno

doi:10.5089/9798400253744.001

IMF Working Papers

2023

DOI: 10.5089/9798400253744.001

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The Zombie Lending Channel of Monetary Policy

Bruno Albuquerque

Abstract: staff, and participants at several seminars and conferences for their suggestions and comments, including the IMF Macrofinancial seminar, the IMF RESMF seminar,

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2024

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Cited by 3 publications

References 72 publications

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Corporate debt booms, financial constraints, and the investment nexus

Albuquerque

2024

J of Applied Econometrics

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SummaryHow do corporate debt booms affect investment? Using US firm‐level data over 1984Q1–2019Q4, and an instrument for firm‐specific debt booms that exploits systematic differences in firms' exposure to industry‐level debt booms, I find that debt booms cause investment growth to decline over the medium term. This result is driven by the financial constraints channel: Vulnerable firms experience a higher cost of debt in the short run, lower stock returns, and an increase in indicators proxying financial risk. Vulnerable firms also cut their investment spending after a debt boom, irrespective of their growth opportunities. Finally, I find that congestion effects from vulnerable firms on healthy firms are amplified during debt booms, stressing the risk that debt booms in a subset of firms may spill over to the rest of the economy.

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Corporate debt booms, financial constraints, and the investment nexus

Albuquerque

2024

J of Applied Econometrics

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Escaping Zombiness: Does Corporate Governance Have the Elixir of Life?

Rodríguez‐Sanz,

Vallelado,

Velasco

2024

British J of Management

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This study investigates the influence of corporate governance on firms’ transition into and out of zombiness. We underscore the beneficial role of external members in the corporate governance structure and long‐tenured chief executive officers (CEOs) in facilitating access to the external resources that firms need to be successful. Using a sample of European listed firms over the period 2008–2018, we adopt a dynamic view of zombiness by identifying shifts in the state from zombie to non‐zombie and vice versa. The results show that board independence is a twofold panacea against zombies, prompting zombie recovery and preventing healthy firms from becoming zombies. By contrast, leadership independence, materialized by separating the CEO and chairperson roles, hampers the recovery of zombies, probably because the cost of lacking unified leadership may exceed the benefits of external dependence minimization. Finally, the results suggest that longer CEO tenure helps healthy firms avoid zombiness. When considering a broader array of stakeholders, government bailout programmes impair zombie recovery, and stronger trade unions help healthy firms escape zombiness. Overall, this study brings a ray of hope to the zombie problem and provides a better appraisal of when supporting zombies might be worthwhile vis‐à‐vis saving promising firms and bringing them back to life.

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Whither the Walking Dead? The Consequences of Artificial Intelligence for Zombie Firms

Banerjee,

Doerr,

Hofmann

2024

The Economists’ Voice

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Zombie firms have been a prominent yet controversial subject of academic and policy debates in recent years. In this article, we first revisit the economic consequences and driving factors of zombie companies and then, based on this assessment, discuss the implications of artificial intelligence (AI) for zombie firms. We document that the share of zombie firms in advanced economies has risen considerably over the past three decades, and that this increase has been a significant drag on productivity growth. We further find that persistently low interest rates are a significant causal factor underlying the rise of zombie companies. Turning to AI, we argue that an AI-induced productivity boom may counteract the drag from zombie firms and improve firm performance, mitigating corporate zombification. Moreover, by leading to higher interest rates that force zombie firms to exit markets, AI may boost productivity further in the longer run – a so far overlooked channel in the debate on the economic implications of AI.

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The Zombie Lending Channel of Monetary Policy

Abstract: staff, and participants at several seminars and conferences for their suggestions and comments, including the IMF Macrofinancial seminar, the IMF RESMF seminar,

Cited by 3 publications

References 72 publications

Corporate debt booms, financial constraints, and the investment nexus

Corporate debt booms, financial constraints, and the investment nexus

Escaping Zombiness: Does Corporate Governance Have the Elixir of Life?

Whither the Walking Dead? The Consequences of Artificial Intelligence for Zombie Firms

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