From policy ambiguity to price volatility: the hidden cost of indecision

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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