Financial constraints and the decision to lease : evidence from German SME

  • The objective of this paper is to test the hypothesis that in particular financially constrained firms lease a higher share of their assets to mitigate problems of asymmetric information. The assumptions are tested under a GMM framework which simultaneously controls for endogeneity problems and firms’ fixed effects. We find that the share of total annual lease expenses attributable to either finance or operating leases is considerably higher for financially strained as well as for small and fast-growing firms – those likely to face higher agency-cost premiums on marginal financing. Furthermore, our results confirm the substitution of leasing and debt financing for lessee firms. However, we find no evidence that firms use leasing as an instrument to reduce their tax burdens. Keywords: Leasing; financial constraints; capital structure; asymmetric information.

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Author:Constantin F. SlottyGND
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 205
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (205)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2009
Year of first Publication:2009
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2009/09/15
Tag:asymmetric information; capital structure; financial constraints; leasing
GND Keyword:Finanzlage; Wirtschaftsgut; Leasing
Page Number:28
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C2 Single Equation Models; Single Variables / C23 Models with Panel Data
Licence (German):License LogoDeutsches Urheberrecht