Zombies at Large? Corporate Debt Overhang and the Macroeconomy

Òscar Jordà; Martin Kornejew; Moritz Schularick; Alan M. Taylor

doi:10.1093/rfs/hhac018

Review of Financial Studies Vol. 35 No. 10 2022

Zombies at Large? Corporate Debt Overhang and the Macroeconomy

Òscar Jordà¹; Martin Kornejew²; Moritz Schularick³; Alan M. Taylor⁴

¹ Federal Reserve Bank of San Francisco and University of California , Davis, and CEPR, USA and France · ² University of Bonn , Germany · ³ University of Bonn and Sciences Po, and CEPR , Germany, France · ⁴ University of California, Davis, NBER, and CEPR , USA and France

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.

DOI: 10.1093/rfs/hhac018
Volume: 35
Issue: 10
Pages: 4561-4586
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Zombies at Large? Corporate Debt Overhang and the Macroeconomy

Abstract

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