This paper investigates the effects of the volatility of debt financing on stock returns. The increase in the volatility of debt financing enlarges financial risk and information asymmetry resulting in the increase in the financing cost. This in turn reduces the firm value, i.e., stock performances. Hence, the volatility of debt financing may be one of the main risk factors that can has negative influence on the stock returns. Through the empirical analysis of listed firms in Korea for the 2005-2015 estimation period, this paper provides persistent and significant evidence that the volatility of debt financing has negative impacts on stock returns while controlling for market factor and firm characteristics such as size factor (firm size, market capitalization), value factor (book-tomarket ratio), momentum factor. While using both monthly average of stock returns and Fama-French-Carhart 4-factor risk-adjusted stock returns as dependent variables, the estimations of Fama-MacBeth cross-sectional regressions produce negative and statistically significant coefficient on the volatility of debt financing. This paper provides academic contribution of finding that the new risk factor, volatility of debt financing, is a significant determinant of stock returns.