Operating Leverage and Stock Returns under Different Aggregate Funding Conditions

• 成果类型: Article
• 署名作者: Garcia-Feijoo, Luis; Jensen, Tyler K.; Koch, Paul D.
• 署名单位: State University System of Florida; Florida Atlantic University; Iowa State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2022-0051
• 发表日期: 2024
• 页码: 169-199
• 关键词: cross-section; monetary-policy; Fundamental analysis; corporate-investment; financial leverage; FUTURE EARNINGS; Distress risk; FULLY REFLECT; INFORMATION; equity

摘要

We document time -varying interrelations between aggregate funding conditions and the impact of operating leverage (OL) on stock returns. OL represents a primitive source of risk, which helps explain the well established unconditional relation between OL and future returns. However, the outperformance of firms with high OL occurs exclusively during periods of unconstrained funding. Although high OL represents operational inflexibility, when the Fed eases funding constraints, improved capital availability mitigates this inflexibility. Consequently, investors bid up the prices of stocks with high OL when aggregate funding constraints are loosened to reflect their lower risk and greater expected performance in unconstrained periods.