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Journal Articles Review of Financial Studies Year : 2022

Zombies at Large? Corporate Debt Overhang and the Macroeconomy

Abstract

Debt overhang is associated with higher financial fragility and slower recovery from recession. However, while household credit booms have been extensively documented to have this property, we find that corporate debt does not fit the same pattern. Newly collected data on nonfinancial business liabilities for 18 advanced economies over the past 150 years shows that, in the aggregate, greater frictions in corporate debt resolution make for slower recoveries, with weak investment and more persistent “zombie firms” and that this is an important factor in explaining the difference in outcomes relative to household credit booms.

Dates and versions

hal-03935641 , version 1 (12-01-2023)

Licence

Attribution - NonCommercial - NoDerivatives - CC BY 4.0

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Òscar Jordà, Martin Kornejew, Moritz Schularick, Alan Taylor. Zombies at Large? Corporate Debt Overhang and the Macroeconomy. Review of Financial Studies, 2022, 35 (10), pp.4561-4586. ⟨10.1093/rfs/hhac018⟩. ⟨hal-03935641⟩
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