Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Operating leases and the assessment of lease-debt substitutability
AU - Beattie, Vivien
AU - Goodacre, Alan
AU - Thomson, Sarah Jane
PY - 2000/3
Y1 - 2000/3
N2 - Operating leases are estimated in the current paper to be approximately thirteen times larger than finance leases, on average. In recognition of this, the paper investigates the degree of substitutability between leasing and non-lease debt using a comprehensive measure of leasing, improving on the partial measures used in prior research. Operating lease liabilities are estimated using the ‘constructive capitalisation’ approach suggested by Imhoff, Lipe and Wright (1991, Accounting Horizons 5, pp. 51–63), modified to incorporate company-specific and UK-relevant assumptions. The results imply that leasing and debt are partial substitutes, with £1 of leasing displacing approximately £0.23 of non-lease debt, on average, consistent with the argument that lessors bear some risks which are not inherent in debt contracts. These findings suggest that substitution effects are not uniform across lease types.
AB - Operating leases are estimated in the current paper to be approximately thirteen times larger than finance leases, on average. In recognition of this, the paper investigates the degree of substitutability between leasing and non-lease debt using a comprehensive measure of leasing, improving on the partial measures used in prior research. Operating lease liabilities are estimated using the ‘constructive capitalisation’ approach suggested by Imhoff, Lipe and Wright (1991, Accounting Horizons 5, pp. 51–63), modified to incorporate company-specific and UK-relevant assumptions. The results imply that leasing and debt are partial substitutes, with £1 of leasing displacing approximately £0.23 of non-lease debt, on average, consistent with the argument that lessors bear some risks which are not inherent in debt contracts. These findings suggest that substitution effects are not uniform across lease types.
KW - Operating leases
KW - Capital structure
KW - Lease–debt substitutability
U2 - 10.1016/S0378-4266(99)00045-X
DO - 10.1016/S0378-4266(99)00045-X
M3 - Journal article
VL - 24
SP - 427
EP - 470
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 3
ER -