Zombie Lending: Theoretical, International, and Historical Perspectives

Viral Acharya, Matteo Crosignani, Tim Eisert, Sascha Steffen

Research output: Contribution to journalArticleAcademicpeer-review

11 Citations (Scopus)


This article surveys the theory on zombie lending incentives and the consequences of zombie lending for the real economy. It also offers a historical perspective by reviewing the growing empirical evidence on zombie lending along three dimensions: (a) the role of undercapitalized banks, (b) effects on zombie firms, and (c) spillovers and distortions for non-zombie firms. We then provide an overview of how zombie lending can be attenuated. Finally, we use a sample of US publicly listed firms to compare various measures proposed in the literature to classify firms as "zombies."We identify definitions of zombie firms that are adequate to investigate economic inefficiency in the form of real sector competitive distortions of zombie lending. We find that only definitions based on interest rate subsidies are able to detect these spillovers and thereby provide evidence in support of credit misallocation.

Original languageEnglish
Pages (from-to)21-38
Number of pages18
JournalAnnual Review of Financial Economics
Issue number1
Early online date2022
Publication statusPublished - 1 Nov 2022

Bibliographical note

Funding Information:
This study was supported by the Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology (no. NRF-2016R1D1A1B04935568).

Publisher Copyright:
© 2022 by Annual Reviews.


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