Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/157918
Authors: 
Storz, Manuela
Koetter, Michael
Setzer, Ralph
Westphal, Andreas
Year of Publication: 
2017
Series/Report no.: 
IWH Discussion Papers 13/2017
Abstract: 
We show that the speed and type of corporate deleveraging depends on the interaction between corporate and financial sector health. Based on granular bank-firm data pertaining to small and medium-sized enterprises (SME) from five stressed and two non-stressed euro area economies, we show that 'zombie' firms generally continued to lever up during the 2010-2014 period. Whereas relationships with stressed banks reduce SME leverage on average, we also show that zombie firms that are tied to weak banks in euro area periphery countries increase their indebtedness even further. Sustainable economic recovery therefore requires both: deleveraging of banks and firms.
Subjects: 
zombie lending
debt overhang
bank stress
JEL: 
E44
G21
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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