%I Elsevier Inc.
%O cited By 0
%R 10.1016/j.irfa.2023.102799
%A H.J.A. Ahmed
%A A.S.M.S. Azad
%A W.C. Poon
%A M. Safiullah
%T Is there a CSI-leverage nexus?
%J International Review of Financial Analysis
%D 2023
%L scholars18186
%V 89
%X We examine how various measures of consumer sentiment index (CSI) affect firms' debt policy decisions. Using U.S. firm-level quarterly data from 1993 to 2017, we provide a strong positive relationship between CSI measures and corporate debt policy, implying that firms use external borrowing during a positive economic outlook and reap the tax-shield benefit. We also find that improved household optimism over financial and business sentiments leads to future household consumption. The CSI-leverage nexus is moderated by the state of firms' financial condition, reputation, and profitability. Importantly, our results are robust to sub-sample analysis, firm-level and macroeconomic controls, econometric specifications, alternative measures of sentiment including Shiller's cyclically adjusted price-earnings ratio (i.e., CAPESH), Baker and Wurgler (2006)�s stock market sentiment index (i.e., SENTBW) and search-based uncertainty measure such as FEARS (i.e., Financial and Economic Attitudes Revealed by Search) index of Da, Engelberg, and Gao (2015). © 2023