We use the universe of very large Amadeus firms to calculate the industry fraction of zombies because the competitive general equilibrium effects work in the aggregate through the full sample of firms receiving zombie credit. We measure the dependence on banks that benefited from the OMT announcement as the average dependence on these banks over the 2009–2011 period. These results show that even within the group of low-IC ratio firms, zombie firms are of significantly worse quality compared to nonzombie firms on observable solvency and liquidity ratios. Berg et al. 2016), so we have to rely on creditworthy European firms and cannot use U. S. firms to calculate the benchmark interest rate. The quarter-to-quarter change in bank-firm lending relationships tends to be relatively low in DealScan as syndicated loans typically have long maturities and DealScan contains information at the time of the loan origination only. From the banks that experienced high OMT windfall gains, 10 are classified as weakly capitalized and 9 are classified as well capitalized when using the 2% buffer split. Krishnamurthy et al. for evidence on the impact of the OMT announcement on government bond spreads and prices.
The estimates are derived from a partial equilibrium analysis that compares the outcomes from the de facto fraction of zombie firms to an outcome if the fraction of zombie firms had stayed at its pre-OMT level. Caballero, Hoshi, and Kashyap, if nonzombie firms have to reduce their business because of competitive distortions, they primarily cut projects with a low productivity, which increases their average productivity. and the dependent variables are the interest rate, employment growth, investment, and productivity. Figure 5, zombie firms have a lower default propensity than other low-IC ratio firms immediately post-OMT (2012–2014) but a significantly higher default probability during 2015–2016.
Table 4, screen B, which compares the particular characteristics of zombie in order to nonzombie firms, shows that will, on average, zombie companies have a significantly increased leverage, and lower online worth and profitability (EBITDA/Assets) ratios. Table 4, screen A, presents a break down of the number associated with zombie firms by nation.
Table 7, where we formally compare the change in the banks’ NPLs/total loans ratios from pre- to post-2014. Second, if government moral suasion was widespread, especially government-owned firms should have received subsidized loans. To investigate this possibility, we use ownership information from Amadeus and rerun our lending regressions not including firms with positive authorities ownership. First, we expose additional interaction terms within Table A7 between PostOMT, Weakly capitalized, Zombie, along with other bank characteristics that can be linked to the banks’ OMT windfall gains. Giannetti and Simonov, because the particular nonlagged zombie dummy by itself would constitute an end result of a bank’s determination to extend credit. thirty-one Hence, the lower credit costs for zombie companies do not appear to be credited to differences in mortgage characteristics.
All outcomes remain similar when utilizing these types of alternative zombie classifications. will be negative, its rating (derived from 3-year median ICs) is BB or reduce, and the syndicate structure has either remained continuous, or banks that remaining the syndicate were not really replaced by new individuals, which is, the same association has already provided the loan to the company. Veronesi and Zingales, the particular Online Appendix shows that will, indeed, the bank work risk was sizable pre-OMT especially for GIIPS banking institutions, but significantly decreased post-OMT for banks with increased OMT windfall gains. This particular evidence suggests that the particular OMT announcement helped the particular affected banks to free of charge up the liquidity obtained under the LTRO system to grant new loan products. The first measure that will potentially could have directed to interfering effects will be the ECB’s LTRO, that was allotted in December plus February to provide even more liquidity towards the European bank system.
The table documents that will the zombie is actually especially severe in the periphery of Europe, with The country of spain and Italy having close to 18% to 20% associated with zombie firms, while Philippines, France, and the UNITED KINGDOM just have between 7% plus 12% zombie firms. In order to ensure the robustness associated with our results with regard to the zombie category, we employ various alternate zombie definitions on the internet Appendix. First, instead of the crisp zombie definition, all of us employ fuzzy zombie steps in which a firm can become a zombie “to the certain degree. ” Following, we do not need a firm to become associated with low-quality to be categorized as zombie. Third, all of us replace the unique attention rate benchmark across almost all industries having an industry-specific standard interest rate.