["Journal of Money, Credit and Banking, EarlyView. ", "\nAbstract\nWe study the different rationales behind zombie lending. Exploiting granular data of different corporate loan types, we identify loan evergreening as instances where firms receive interest‐only loans to repay existing amortizing loans. Avoidance of losses that erode bank capital is an important reason for zombie lending to multiple‐bank firms, but not to single‐bank firms. When banks provide loan evergreening to single‐bank firms, these firms are less likely to receive credit and additional loan evergreening by the bank in the future, more likely to default, and to start new lending relationships afterward; this is consistent with banks providing loan evergreening to allow less creditworthy borrowers to obtain additional financing elsewhere and reduce their own exposure. Finally, zombie lending to multiple‐bank firms leads to credit displacement, but zombie lending to single‐bank firms does not."]