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Journal Article

Zombies at Large? Corporate Debt Overhang and the Macroeconomy

The Review of Financial Studies

Authors

  • Jordà
  • Ò.
  • Kornejew
  • M.
  • Schularick
  • M.
  • Taylor
  • A.M.

Publication Date

DOI

10.1093/rfs/hhac018

JEL Classification

E44 G32 G33 N20

Key Words

Corporate Debt

Credit Booms

Recession

Related Topics

International Finance

Economic & Financial Crises

Companies

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.

Kiel Institute Expert

  • Prof. Dr. Moritz Schularick
    President

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