Defunding Controversial Industries: Can Targeted Credit Rationing Choke Firms?

Firms fully replace lost targeted-bank credit through non-targeted banks, leaving total debt unchanged.

Kunal Sachdeva, André F. Silva, Pablo Slutzky, Billy Xu

Journal of Financial Economics 172 (2025): 104133

Firms fully replace lost targeted-bank credit through non-targeted banks, leaving total debt unchanged.

We examine Operation Choke Point, a regulatory initiative targeting bank relationships with certain industries. Affected firms fully compensate for lost credit access through non-targeted banks, with no changes in total debt or investment—highlighting challenges of using financial regulation to restrict specific industries.

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Cite
@article{sachdeva2025defunding,
  title={Defunding controversial industries: Can targeted credit rationing choke firms?},
  author={Sachdeva, Kunal and Silva, Andr{\'e} F. and Slutzky, Pablo and Xu, Billy},
  journal={Journal of Financial Economics},
  volume={172},
  pages={104133},
  year={2025},
  doi={10.1016/j.jfineco.2025.104133}
}

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