Journal of Financial and Quantitative Analysis Vol. 60 No. 8 2025
The Role of Bank CEOs in Zombie Lending During a Crisis: Evidence from India
Abstract
A well-documented pattern of bank lending during crises is allocating credit to insolvent firms at the expense of productive firms, leading to inefficient resource allocation at the macro level. I investigate the role of bank CEOs in influencing such distortions during crises, using the strictly enforced age-based retirement policy of Indian government-controlled banks. I find that banks experiencing a CEO turnover in a crisis are less likely to bail out insolvent borrowers, as the new CEO has a lower incentive to do so. Consequently, the efficiency of credit allocation improves, and the zombification of the economy decreases.
- DOI
- 10.1017/s0022109025101737
- Volume
- 60
- Issue
- 8
- Pages
- 4009-4034
- Language
- en
- Sources
- openalex crossref