Identifying Zombie Lending: Evidence Using Loan-Level Data

We identify ever-greening motivated by loan officer incentives. We devise a novel zombie lending measure in a setting dominated by non-verifiable information. We identify loans that are renewed quickly after repayment of the previous loan, where the same officer is in charge during the issuance of both loans, and transactions are consummated close to the repayment deadline for the first loan as cases that are plausibly ever-greened. We find that loans get repeatedly ever-greened during the tenure of a loan officer and default soon after the officer moves out of a branch pursuant to time based mandatory job rotation.