IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v71y2025i2p1260-1286.html
   My bibliography  Save this article

Bank Specialization and Zombie Lending

Author

Listed:
  • Olivier De Jonghe

    (Research Department, National Bank of Belgium, 1000 Brussels, Belgium; and Finance Department, Tilburg University, 5000LE Tilburg, Netherlands)

  • Klaas Mulier

    (Department of Accounting, Corporate Finance and Taxation, Ghent University, 9000 Gent, Belgium)

  • Ilia Samarin

    (Research Department, National Bank of Belgium, 1000 Brussels, Belgium)

Abstract

We study whether banks internalize congestion externalities when lending to zombie firms. We conjecture that banks should be better informed about the presence of zombie firms and the congestion externalities that such firms exert on healthy borrowers in industries where banks are specialized and show that banks’ credit supply to zombie firms relates negatively to their industry specialization. This relation is stronger when congestion externalities are likely to have stronger adverse effects, namely when zombie firms take a higher fraction of resources in the industry or when the industry is geographically more concentrated. Additionally, this relation is weaker in industries with higher asset specificity as zombie firms’ default (and potential asset fire sales) could reduce healthy borrowers’ collateral value.

Suggested Citation

  • Olivier De Jonghe & Klaas Mulier & Ilia Samarin, 2025. "Bank Specialization and Zombie Lending," Management Science, INFORMS, vol. 71(2), pages 1260-1286, February.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:2:p:1260-1286
    DOI: 10.1287/mnsc.2023.01437
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2023.01437
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2023.01437?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    credit misallocation; zombie lending; bank specialization; soft industry information;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:71:y:2025:i:2:p:1260-1286. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.