In the 1990s, undercapitalized banks continued lending to weak Japanese firms, thus retarding recovery in the real economy (Cabellero, Hoshi, and Kashyap 2008; Peek and Rosengren 2005). More recent studies look at the size of capital injections needed to address the issue and to discourage the evergreening of loans (Gianetti and Simonov 2013). Direct comparisons between Japan and Europe are difficult.
Nevertheless, there is a growing body of evidence suggesting that issues related to evergreening and distress lending are features of European banking markets. For OECD countries, McGowan et al. (2017) show that weakly performing firms have been attracting larger resources, with negative consequences for the performance of stronger firms.