How Does Consumer Sentiment Shape Corporate Risk-Taking Behavior? Empirical Evidence Based on the Baidu Index

Consumer sentiment is a potent macroeconomic force whose impact on firm risk-taking remains understudied. Using a province-level consumer sentiment index derived from Baidu search data for 31 Chinese provinces from 2011 to 2023, we examine its relationship with listed firms’ risk-taking. Higher consumer sentiment is associated with greater corporate risk-taking, and the relationship is consistent with two channels: internally, positive sentiment is associated with stronger managerial long-term orientation; externally, with greater analyst optimism bias, fostering a more tolerant information environment for risk-taking. Institutional monitoring and social security fund ownership attenuate these sentiment-driven adjustments. Our findings point to consumer sentiment as an independent demand-side correlate of corporate risk behavior, distinct from the supply-side factors emphasized in prior work.