Do we want these two to tango? On zombie firms and stressed banks in Europe

Arbeitspapier

We show that the speed and type of corporate deleveraging depends on the interaction between corporate and financial sector health. Based on granular bank-firm data pertaining to small and medium-sized enterprises (SME) from five stressed and two non-stressed euro area economies, we show that 'zombie' firms generally continued to lever up during the 2010-2014 period. Whereas relationships with stressed banks reduce SME leverage on average, we also show that zombie firms that are tied to weak banks in euro area periphery countries increase their indebtedness even further. Sustainable economic recovery therefore requires both: deleveraging of banks and firms.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IWH Discussion Papers ; No. 13/2017

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: zombie lending ; debt overhang ; bank stress

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Storz, Manuela ; Koetter, Michael ; Setzer, Ralph ; Westphal, Andreas
• Event: Veröffentlichung
• (who): Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
• (where): Halle (Saale)
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/157918
• URN: urn:nbn:de:gbv:3:2-72072
• Last update: 10.03.2025, 11:41 AM CET