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UID:f232c14c459c058d46c6b94c6d204453
CATEGORIES:Seminars
CREATED:20250416T080555
SUMMARY:Andrea Caggese - UPF, CREI, and Barcelona GSE
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Zombies? Growth Options, Heterogeneous Firms, and the Allocative Effects of
  Zombie Lending"\nAbstract: \nWe develop a model with firm dynamics, i
 mperfect competition, and growth options. Firms borrow using credit lines o
 ffered by competitive lenders that can optimally provide zombie lending (th
 at is, reducing the interest rate on borrowing below the risk free rate). W
 e solve and calibrate the model and show that zombie lending is used in equ
 ilibrium to subsidise two very different types of firms: ``stagnant zombies
 '' previously borrowed to fund projects that are no longer feasible. They a
 re offered zombie lending so that they can gradually reduce their debt and 
 avoid default. ``high-potential zombies'' have growth options and borrow to
  pursue them. Zombie lending ``buys them more time'', in the hope they will
  become more profitable in the future and will thus be able to repay the de
 bt. The main insight of the model is that while both types of zombie firms 
 are consistent with the way such firms are usually identified in the empiri
 cal literature, they have opposite implications for misallocation and aggre
 gate productivity and welfare. We use the model to propose novel criteria t
 o identify the different zombie types and new testable predictions of their
  allocative effects: i) An increase in markup dispersion within industries 
 should increase the share of zombie firms and the share of zombies that in 
 the future recover and reach top quartile performance. ii) Sectors where zo
 mbies behave like high-potential ones should exhibit positive TFP responses
  to zombie prevalence, while those dominated by stagnant zombies should sho
 w declining productivity. Using firm-level data from Italian firms between 
 2007-2016, we provide robust empirical evidence confirming these prediction
 s.\n
DTSTAMP:20260429T054546Z
DTSTART:20251204T163000Z
DTEND:20251204T180000Z
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