Essay How Lenders Follow The Herd
Companies involved in risky environmental operations must be acutely aware of all market players, and not concern themselves solely with shareholder interest. Debt financing is an important part of the borrowing firm’s capital structure, and often a critical player in project financing.
The final takeaways from the case study are that lenders will reward for certain behaviours while investors generally do not, but both lenders and investors punish for bad behaviours by divesting or charging higher return rates, all of which threatens the delicate ratio between debt and equity cost of capital. Because while the effects of market players’ behaviour may not initially seem so grave, they have can have serious impacts on next quarters’ balance sheet.