Inconsistent debt policies can lead to higher investor ambiguity, suggests research
In August 2022, Olympic Steel shifted from an inconsistently moderate working capital financing policy (WCFP) to a clear conservative policy. Within months, its stock price rose 22 percent, outperforming many of its competitors during a broader market decline, and its volatility of volatility (VOV) – a forward-looking measure of investor uncertainty – dropped by nearly half. Our research shows that this wasn’t a one-off, but part of a broader pattern. How a company structures its debt, particularly its short-term financing, can profoundly shape investor perceptions of future . . .
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