Official websites use .gov
A .gov website belongs to an official government organization in the United States.
Secure .gov websites use HTTPS
A lock (
) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.
Topics
Data & Maps
Surveys & Programs
Resource Library
Leasing, Ability to Repossess, and Debt Capacity
Leasing, Ability to Repossess, and Debt Capacity
Working Paper Number CES-07-19
Abstract
This paper studies the financing role of leasing and secured lending. We argue that the benefit of leasing is that repossession of a leased asset is easier than foreclosure on the collateral of a secured loan, which implies that leasing has higher debt capacity than secured lending. However, leasing involves agency costs due to the separation of ownership and control. More financially constrained firms value the additional debt capacity more and hence lease more of their capital than less constrained firms. We provide empirical evidence consistent with this prediction. Our theory is consistent with the explanation of leasing by practitioners, namely that leasing "preserves capital," which the academic literature considers a fallacy.
Others in Series
Working Paper
Using the P90/P10 Index to Measure U.S. Inequality Trends with Current Population Survey Data: A View From Inside the Census Bureau Vaults
Working Paper
The Adoption and Diffusion of Organizational Innovation: Evidence for the U.S. Economy
Working Paper
Issues and Challenges in Measuring Environmental Expenditures by U.S. Manufacturing: The Redevelopment of the PACE Survey
Page Last Revised - October 8, 2021
✕
Is this page helpful?
Yes
No
Yes
No✕
NO THANKS
255 characters maximum
255 characters maximum reached
255 characters maximum reached
✕
Thank you for your feedback.
Comments or suggestions?
Comments or suggestions?
