Bankruptcy Costs and the Financial Leasing Decision

Krishnan, V. Sivarama; Moyer, R. Charles

doi:10.2307/3665737

Cited by 135 publications

(115 citation statements)

References 14 publications

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“…He developed his Z score model using financial ratios and multiple discriminant analysis to predict business failure. Krishnan and Moyer (1994) also supported Altman Z-scores, as a measure of bankruptcy potential. A good number of models have been developed in the past to measure the efficiency and financial health of corporate enterprises.…”

Section: Financial Ratios As Measurers Of Performancementioning

confidence: 85%

An Analysis of the Financial Performance of Selected Savings and Credit Co-Operative Societies in Botswana

Sathyamoorthi

Mbekomize

Radikoko

et al. 2016

IJEF

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The co-operative sector plays an important role in a country's socio-economic development. This paper evaluated the financial performance of 9 selected Savings and Credit Co-operative Societies (SACCOSs) in Botswana by analysing audited financial statements of a five-year period from 2008 to 2012. The analytical techniques used include descriptive statistics of financial aggregates and ratios, correlation, regression and common size analyses. The financial aggregates analysed included all items that impact income generation as well as items that represent the financial position of the selected societies. The findings underscored that the selected SACCOSs achieved good financial results and were in strong financial position. The results also indicated a significant relationship between Net Profit ratio and Capital Employed Ratio to inform that the Net Profit Ratio was the most important explainer of Return on Capital Employed. The 5 year common size analysis also revealed a growth in income and in the financial status of the selected societies. The capital structure of these societies was characterised by substantial share of internal funds. Conclusively, maintaining an optimal balance between the interest on loans and interest on members' savings, and investing extra cash in diversified portfolio to reduce the risk levels would make the SACCOSs grow and function more productively and profitably. They would also then succeed in attracting more members and thereby significantly contribute towards poverty reduction and economic diversification drives in the country.

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Section: Financial Ratios As Measurers Of Performancementioning

confidence: 85%

An Analysis of the Financial Performance of Selected Savings and Credit Co-Operative Societies in Botswana

Sathyamoorthi

Mbekomize

Radikoko

et al. 2016

IJEF

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“…Further, regression-based analyses confirm that companies behave as if lease finance is complementary to (US: Ang and Peterson, 1984), or only a partial substitute for debt finance (US: Marston and Harris, 1988;Krishnan and Moyer, 1994; UK: Adedeji and Stapleton, 1996;Beattie, Goodacre and Thomson, 2000a;Belgium: Deloof and Verschueren, 1999); in both situations the use of leases allows an increase in overall 'borrowing'. In the UK, Adedeji and Stapleton (1996) estimated that £1 of finance leasing displaced about £0.55 of debt.…”

Section: Leasing and Capital Structurementioning

confidence: 90%

Assessing the potential impact of lease accounting reform: a review of the empirical evidence*

Goodacre

2003

Journal of Property Research

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SummaryAccounting standard-setters have proposed that the right to use assets (including land and buildings) acquired under operating lease contracts should be recognised on the balance sheet of lessee companies. In recent years, several empirical research studies have investigated the potential impact of the proposed changes in accounting for leases. The current paper reviews this work and presents some new evidence, for a property audience.The paper summarises evidence that operating leases represent a major source of finance for many companies generally, and more specifically for companies in the retail sector. Recognition of operating leases on the lessee's balance sheet would have a significant impact on performance measures, especially gearing. If markets are informationally 'efficient' such changes should have little impact. However, research evidence on efficiency with respect to lease accounting information is mixed. What's more, company managers do not believe that the market is efficient so are likely to behave as if the markets are 'inefficient'. Possible reactions include reduced use of leasing, shorter lease contract terms, more break clauses, or increased use of contingent rental agreements. It seems likely that lessors will be under pressure to bear greater risks.

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“…Deloof et al (2007) point out that leases and debt are fixed, contractual obligations that reduce the firm's debt capacity. The literature shows that leases and corporate debt are substitutes in case of both large organisations and SMEs (e.g., Huang and Yildirim, 2006;Deloof et al, 2007;Yan, 2006;Beattie et al, 2000;Lasfer and Lewis, 1998;Adedeji and Stapleton, 1996;Nguyen and Sharpe, 1995;Krishnan and Moyer, 1994;Lewis and Schallheim, 1992). While Huang and Yildirim (2006) observe that the substitution ratio increases as debt maturity increases, Lasfer and Lewis (1998) find that the substitutability of debt and lease contracts for large companies was largely driven by taxes.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Other factors influencing the usage of leasing have also been recognised, including costs of financial distress and government regulation (Graham et al, 1998), asymmetric information (Deloof et al, 2007;Krishnan and Moyer, 1994), cultural acceptance (Gao, 1999), and insitutional developments (Berger and Udell, 2006). For example, Krishnan and Moyer (1994) argue that the presence of asymmetric information can be overcome by leasing. Leasing is even better than secured debt, as the lessor has superior claims over secured lenders, therefore leasing reduces bankruptcy costs.…”

Section: Literature Reviewmentioning

confidence: 99%

Emerging market financial services development: the case of leasing in Poland and China

Jaworski

Gao

Śliwiński

2014

IJIL

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Bankruptcy Costs and the Financial Leasing Decision

Cited by 135 publications

References 14 publications

An Analysis of the Financial Performance of Selected Savings and Credit Co-Operative Societies in Botswana

An Analysis of the Financial Performance of Selected Savings and Credit Co-Operative Societies in Botswana

Assessing the potential impact of lease accounting reform: a review of the empirical evidence*

Emerging market financial services development: the case of leasing in Poland and China

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