We provide evidence consistent with a “credit-line drawdown channel” to explain the large and persistent crash of bank stock prices during the COVID-19 pandemic. Stock prices of banks with large ex-ante exposures to undrawn credit lines and large ex-post gross drawdowns declined more,...

This paper surveys the theory on zombie lending incentives and the consequences of zombie lending for the real economy. It also offers a historical perspective by reviewing the growing empirical evidence on zombie lending along three dimensions: (i) the role of under-capitalized banks, (ii)...

We study the crash of bank stock prices during the COVID-19 pandemic. We find evidence consistent with a "credit line drawdown channel". Stock prices of banks with large ex-ante exposures to undrawn credit lines as well as large ex-post gross drawdowns decline more. The effect is attenuated for...

When the Federal Reserve (Fed) expanded its balance sheet via quantitative easing (QE), commercial banks financed reserve holdings with deposits and reduced their average maturity. They also issued lines of credit to corporations. However, when the Fed halted its balance-sheet expansion in 2014...