Using data on bank-firm relationships in Italy during the Eurozone financial crisis, we show that: (i) compared to healthy banks, under-capitalised banks cut credit to healthy but not to zombie firms and are more likely to prolong a credit relationship with a zombie; (ii) in area sectors with more low-capital banks, zombies are more likely to survive; (iii) bank under-capitalisation does not hurt the growth rate of healthy firms. We provide evidence that extending credit to the weakest firms during the recession mitigated the disruption of supply chains and adverse local demand externalities.

Credit misallocation during the European financial crisis

Tabellini, Guido
2022

Abstract

Using data on bank-firm relationships in Italy during the Eurozone financial crisis, we show that: (i) compared to healthy banks, under-capitalised banks cut credit to healthy but not to zombie firms and are more likely to prolong a credit relationship with a zombie; (ii) in area sectors with more low-capital banks, zombies are more likely to survive; (iii) bank under-capitalisation does not hurt the growth rate of healthy firms. We provide evidence that extending credit to the weakest firms during the recession mitigated the disruption of supply chains and adverse local demand externalities.
2022
2021
Schivardi, Fabiano; Sette, Enrico; Tabellini, Guido
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4042920
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