Management Practice Insights
DOI: 10.59571/mpi.v4i2.6
Year: 2026, Volume: 4, Issue: 2, Pages: 107-113
Original Article
Shalini Talwari*, Kunjana Maliki & Misha Bansal
iS.P. Jain Institute of Management & Research
*Corresponding author
Email: [email protected]
Received Date:25 October 2024, Accepted Date:15 June 2026, Published Date:15 October 2026
Every Chief Financial Officer (CFO) faces the decision of optimising the mix of debt and equity to finance their firm. What makes the optimisation challenging is that firms’ financing decisions regarding what (debt or equity), how much, and when can trigger financial distress and even insolvency. A key question for the office of the CFO thus arises: what cues should their company follow when they want to raise funds: just their internal needs, the market sentiment**, or something else? Zooming in on the when part, does the answer lie in market sentiment? If yes, then should a company raise debt or equity when market sentiment is high? If the answer turns out to be debt, should the company prefer debt with a longer maturity or a shorter maturity? Answers come from recent Research by Li, Hoque, and Liu that examines how changing sentiments impact a company’s decision to raise debt. A key finding was that during high-sentiment periods, companies increased borrowing and shifted toward shortermaturity debt. In this article, we examine how this finding varies across company contexts and highlight important considerations for implementation, particularly the risk of debt overhang or overleveraging
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© 2026 Published by SPJIMR. This is an open-access article under the CC BY license (https://creativecommons.org/licenses/by/4.0/)
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