Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/77714
Title: Zombie Lending, Financial Reporting Opacity and Contagion
Authors: LIN YUPENG
Keywords: Bank lending, Zombie firms, Collusion, Earnings manipulation
Issue Date: 7-Mar-2014
Source: LIN YUPENG (2014-03-07). Zombie Lending, Financial Reporting Opacity and Contagion. ScholarBank@NUS Repository.
Abstract: Using a novel dataset of listed firms in Japan, we find that bank lending to zombie (insolvent) borrowers induces these borrowers to manipulate earnings. Such an effect is more pronounced when the lending is from borrowers? main banks or for longer term loans, suggesting a complicity of informed banks in earnings manipulations. We overcome the endogeneity concern using a natural experiment arising from capital injections into banks instituted by the Japanese Government in the late 90?s and find a consistent result. Further, we examine the industry spillover (contagion) effect of such accounting manipulation and find that profitable firms adopt more opaque reporting when the industry is dominated by zombie firms. Overall, our results suggest that keeping insolvent borrowers afloat deteriorates the information environment of both zombie firms and their profitable industry peers.
URI: http://scholarbank.nus.edu.sg/handle/10635/77714
Appears in Collections:Ph.D Theses (Open)

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