Determinants of corporate leasing policy

Article Abstract:

Research into lease or buy decisions and data accumulated on types of assets leased, by type of firm, indicates that tax considerations affect decisions of whether to lease or buy assets; however, the decisions as to which assets to lease are not strictly tax questions. Eight non-tax incentives for leasing assets are identified. Leasing occurs when: (1) asset values are not tied to use and maintenance, (2) assets are not customized for the lessor, (3) the useful life of the asset exceeds the lessee's planned use of the asset, (4) the lessee's bonds contain restrictive financial policy statements, (5) dividends to managers must be paid out from invested capital, (6) the lessor is closely held, (7) the lessor has market power, and (8) the lessor is adept at asset disposal. The discussion following this presentation suggests that a mathematical model of leasing decisions could be developed from this research.

Economic aspects, Commercial leases, Assets (Accounting), Lease or buy decisions

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Accounts receivable management policy: theory and evidence

Article Abstract:

This paper develops and tests hypotheses that explain the choice of accounts receivable management policies. The tests focus on both cross-sectional explanations of policy-choice determinants, as well as incentives to establish captives. We find size, concentration, and credit standing of the firm's traded debt and commercial paper are each important in explaining the use of factoring, accounts receivable secured debt, captive finance subsidies, and general corporate credit. We also offer evidence that captive formation allows more flexible financial contracting. However, we find no evidence that captive formation expropriates bondholder wealth. (Reprinted by permission of the publisher.)

Analysis, Financial management, Accounts receivable

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The maturity structure of corporate debt

Article Abstract:

We provide an empirical examination of the determinants of corporate debt maturity. Our evidence offers strong support for the contracting-cost hypothesis. Firms that have few growth options, are large, or are regulated have more long-term debt in their capital structure. We find little evidence that firms use the maturity structure of their debt to signal information to the market. The evidence is consistent, however, with the hypothesis that firms with larger information asymmetries issue more short-term debt. We find no evidence that taxes affect debt maturity. (Reprinted by permission of the publisher.)

Research, Financial instruments, Debt financing (Corporations), Debt financing

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