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URN to cite this document: urn:nbn:de:bvb:703-epub-8888-2
Title data
Herweg, Fabian ; Kähny, Maximilian:
Do zombies rise when interest rates fall : A relationship banking model.
In: European Economic Review.
Vol. 182
(2026)
.
- 105218.
ISSN 0014-2921
DOI der Verlagsversion: https://doi.org/10.1016/j.euroecorev.2025.105218
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Abstract
A relationship bank or market investors finance an entrepreneur’s risky project. Unlike investors, the bank can identify and liquidate bad projects at an interim stage. If the entrepreneur can provide only limited capital, the optimal loan contract induces an inefficient continuation decision, i.e., the bank engages in zombie lending. In the short run – for a given contract – the bank’s incentive to roll over bad loans is enhanced if the base interest rate drops. In the long run, however, the bank adjusts the contract to a drop in the interest rate, and the effect on zombification is reversed.
Further data
| Item Type: | Article in a journal |
|---|---|
| Keywords: | Evergreening; Interest rates; Loan rollover; Relationship banking; Zombie firms |
| DDC Subjects: | 300 Social sciences > 330 Economics |
| Institutions of the University: | Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII - International Competition Policy > Chair Economics VIII - International Competition Policy - Univ.-Prof. Dr. Fabian Herweg Faculties Faculties > Faculty of Law, Business and Economics Faculties > Faculty of Law, Business and Economics > Department of Economics Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII - International Competition Policy |
| Language: | English |
| Originates at UBT: | Yes |
| URN: | urn:nbn:de:bvb:703-epub-8888-2 |
| Date Deposited: | 13 Feb 2026 10:10 |
| Last Modified: | 13 Feb 2026 10:10 |
| URI: | https://epub.uni-bayreuth.de/id/eprint/8888 |
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