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Creditor rights, zombie firms and real activity: evidence from India

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  • Saibal Ghosh

Abstract

Exploiting the enactment of the Insolvency and Bankruptcy Code in 2016 as a quasi-natural experiment, we tease out the causal impact of banking relationships on zombie firms. The findings suggest that firms associated with state-owned banks experienced lower likelihood of zombieness, which differs across bank financials and the number of banking relationships. The impact manifests in a decline in real investment, primarily by crowding out bank resources (‘congestion channel’) and weakening bank asset quality (‘asset quality channel’).

Suggested Citation

  • Saibal Ghosh, 2026. "Creditor rights, zombie firms and real activity: evidence from India," Applied Economics Letters, Taylor & Francis Journals, vol. 33(13), pages 2298-2305, July.
    • Handle: RePEc:taf:apeclt:v:33:y:2026:i:13:p:2298-2305
    DOI: 10.1080/13504851.2025.2471548
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