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Zombie firms and economic stagnation in Japan

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Author Info

  • Alan Ahearne

    ()

  • Naoki Shinada

    ()

Abstract

It is often claimed that one contributing factor to Japan's weak economic performance over the past decade is that Japanese banks have continued to provide financial support for highly inefficient, debt-ridden companies, commonly referred to as "zombie" firms. Such poor banking practices in turn prevent more productive companies from gaining market share, strangling a potentially important source of productivity gains for the overall economy. To explore further the zombie-firm hypothesis, we use industry- and firm-level Japanese data and find evidence that productivity growth is low in industries reputed to have heavy concentrations of zombie firms. We also find that the reallocation of market share is going in the wrong direction in these industries, adding to already weak productivity performance. In addition, we find evidence that financial support from Japanese banks may have played a role in sustaining this perverse reallocation of market share.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10368-005-0041-1
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Bibliographic Info

Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 2 (2005)
Issue (Month): 4 (December)
Pages: 363-381

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Handle: RePEc:kap:iecepo:v:2:y:2005:i:4:p:363-381

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Web page: http://www.springerlink.com/link.asp?id=111059

Related research

Keywords: Productivity; Banking system; Creative destruction;

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References

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  1. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-77, December.
  2. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau.
  3. Hoshi, Takeo & Kashyap, Anil K., 1990. "Evidence on q and investment for Japanese firms," Journal of the Japanese and International Economies, Elsevier, vol. 4(4), pages 371-400, December.
  4. Takeo Hoshi & Anil Kashyap, 2000. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 129-212 National Bureau of Economic Research, Inc.
  5. David C. Smith, 2003. "Loans to Japanese borrowers," International Finance Discussion Papers 769, Board of Governors of the Federal Reserve System (U.S.).
  6. Joe Peek & Eric S. Rosengren, 2005. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," American Economic Review, American Economic Association, vol. 95(4), pages 1144-1166, September.
  7. Bee Yan Aw & Xiaomin Chen & Mark J. Roberts, 1997. "Firm-level Evidence on Productivity Differentials, Turnover, and Exports in Taiwanese Manufacturing," NBER Working Papers 6235, National Bureau of Economic Research, Inc.
  8. Se-Jik Kim, 2003. "Macro Effects of Corporate Restructuring in Japan," IMF Working Papers 03/203, International Monetary Fund.
  9. Smith, David C., 2003. "Loans to Japanese borrowers," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 283-304, September.
  10. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
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