Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Article
  • AEA Papers and Proceedings

Weak Corporate Insolvency Rules: The Missing Driver of Zombie Lending

By: Bo Becker and Victoria Ivashina
  • Format:Print
ShareBar

Abstract

"Zombie lending"—lending to less-productive firms at subsidized rates—can help banks with misaligned incentives in the short run, but it prolongs economic downturns. We propose that inefficient resolution of insolvency is a significant contributor to this problem. We exploit variation in the efficiency of insolvency across countries to show that lack of formal bankruptcies, cheap (zombie) credit, and stickiness of existing creditors is more common in bad economic periods when insolvency works less well.

Keywords

Zombie Credit; Insolvency and Bankruptcy; Financing and Loans; Economic Slowdown and Stagnation

Citation

Becker, Bo, and Victoria Ivashina. "Weak Corporate Insolvency Rules: The Missing Driver of Zombie Lending." AEA Papers and Proceedings 112 (May 2022): 516–520.
  • Find it at Harvard
  • Register to Read

About The Author

Victoria Ivashina

Finance
→More Publications

More from the Authors

    • June 2025
    • Faculty Research

    Blackstone Credit and Delaware Basin Resources

    By: Victoria Ivashina and Srimayi Mylavarapu
    • 2025
    • Faculty Research

    Performance Capital Flows in DC Pensions

    By: Bryan Gutierrez Cortez, Victoria Ivashina and Juliana Salomao
    • February 2025
    • Faculty Research

    Blue Owl Financing of Ping Identity

    By: Victoria Ivashina and Srimayi Mylavarapu
More from the Authors
  • Blackstone Credit and Delaware Basin Resources By: Victoria Ivashina and Srimayi Mylavarapu
  • Performance Capital Flows in DC Pensions By: Bryan Gutierrez Cortez, Victoria Ivashina and Juliana Salomao
  • Blue Owl Financing of Ping Identity By: Victoria Ivashina and Srimayi Mylavarapu
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College.