Leasing Decisions and Credit Constraints: Empirical Analysis on a Sample of Italian Firms

Cosci, Stefania; Guida, Roberto; Meliciani, Valentina

doi:10.1111/j.1468-036x.2013.12019.x

Cited by 18 publications

(4 citation statements)

References 49 publications

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“…For example, a founder with deep knowledge of bank loans will know that different banks use different criteria and offer different conditions, based on how and where the firm plans to use the money. In general, an entrepreneur's deep knowledge of a specific type of debt financing implies a greater understanding of the availability and the respective costs and benefits of that particular debt instrument, given the new firm's current situation (for a discussion, see Huyghebaert and Van de Gucht, 2007 on trade credit and Cosci, Guida and Meliciani, 2015 on asset leasing). This means that founders with deep knowledge of debt financing sources can, for instance, more easily assess whether specific financing conditions (e.g.…”

Section: Theoretical Developmentmentioning

confidence: 99%

Founder's Financial Knowledge and the New Firm's Ability to Obtain Debt Financing

Rijssegem,

Paeleman,

Hünermund

et al. 2023

British J of Management

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How does a founder's knowledge of debt financing influence his/her new firm's ability to obtain the amount of debt financing it desires? Building on the cognitive psychology literature, we propose that the depth of a founder's debt financing knowledge is positively associated with the new firm's ability to obtain debt financing as he/she will be better at selecting and acquiring relevant sources of debt financing. Integrating insights on entrepreneurial growth‐oriented strategies, we further argue that this relationship will be more pronounced when the new firm internationalizes and innovates more. Using a Heckman full information maximum likelihood model, we analyse survey data on 1845 Flemish new firms. The first stage of the model estimates the new firm's probability of raising debt financing. The second stage tests the relationship between the founder's knowledge depth of debt financing and the new firm's debt financing ability, conditional on the decision to raise debt financing. We find that the founder's knowledge depth of debt financing is positively associated with the new firm's ability to obtain debt financing. This association becomes even more pronounced when the new firm internationalizes more. These findings extend the entrepreneurial finance, entrepreneurial strategy and cognitive psychology literature.

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Section: Theoretical Developmentmentioning

confidence: 99%

Founder's Financial Knowledge and the New Firm's Ability to Obtain Debt Financing

Rijssegem,

Paeleman,

Hünermund

et al. 2023

British J of Management

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“…The study also found that the main problem of leasing was the low level of knowledge of leasing to the businessmen. Moreover, the usage of leasing depends on internal characteristics of the firms (Cosci, Guida, & Meliciani, 2015). Firms that had limitation in getting credit were more likely to use leasing.…”

Section: Introductionmentioning

confidence: 99%

Lease Vs. Loan: Evidence from Bangladesh

Chowdhury¹

2023

JEFMS

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Finance comprises mainly three decisions, namely investment decisions, financing decisions, and dividend decisions. Every decision is significant to maximize shareholders’ value. Among these three decisions, financing decisions determine the proportion of debt and equity capital in the capital structure. The importance of financing decisions is enormous in the business world. A firm cannot reach its ultimate goal of wealth maximization if it undertakes a wrong financial decision. Thus, this paper examines the comparative cost of two sources of financing, namely lease and loan to determine the best sources at different tax rates and interest rates. It is a case-based analysis where six lease contacts are examined. Data collection is the most troublesome step in this research. The prevailing interest rate, loan amount, and conditions of the loan collected from the lessee are based on high confidentiality. After analyzing six cases the research finds that the present value of cash outflow of lease is less than that of the loan at different interest rates and tax rates in Bangladesh. The study also reveals that tax, cost of capital, duration, present value of cash flow differences, and additional payment of lease and loan significantly impact the present value of cash outflow of leases and loans. Moreover, lease financing has some other benefits compared to loans. Thus firms should give more attention to lease financing as a source of financing.

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“…Second, our paper contributes to the corporate leasing literature by identifying CEOs’ risk‐taking incentives as an important determinant of the corporate lease‐versus‐buy decision. Studies in this area have identified numerous determinants of leasing, including taxes (Franks & Hodges, 1978; Graham et al, 1998; Miller & Upton, 1976; Myers, Dill, & Bautista, 1976; Ross, Westerfield, & Jaffe, 1996; Smith & Wakeman, 1985), ownership structure (Flath, 1980; Mehran, Taggart, & Yermack, 1999; Smith & Wakeman, 1985), investment opportunity (Barclay & Smith, 1995; Smith & Wakeman, 1985; Stulz & Johnson, 1985; Williamson, 1988), transaction costs (Flath, 1980; Sharpe & Nguyen, 1995; Smith & Wakeman, 1985), leverage (Ang & Peterson, 1984; Bayless & Diltz, 1986; Bowman, 1980; Cosci & Guida, 2015; Krishnan & Moyer, 1994; Mukherjee, 1991), and agency cost and corporate governance factors (Devos & Rahman, 2014; Robicheaux, Fu, & Ligon, 2008). However, the risk‐inducing role of compensation contracts has not been examined.…”

Section: Introductionmentioning

confidence: 99%

Do firms lease to hedge? CEO risk‐taking and operating lease intensity

Devos

2020

Euro Fin Management

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Operating leases are used extensively for financing, but their ability to separate ownership and use also creates hedging opportunities. We investigate whether firms recognize such opportunities by examining the relation between chief executive officer (CEO) risk-taking incentives and the use of operating leases.Consistent with firms using operating leases to hedge, we find higher CEO risk-taking incentives lower operating lease intensity. To address endogeneity, we use the adoption of Statement of Financial Accounting Standards 123R as an exogenous shock to option compensation, dynamic panel generalized method of moments, simultaneous equations, and change regressions. Our results are robust to placebo and alternative tests.

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Leasing Decisions and Credit Constraints: Empirical Analysis on a Sample of Italian Firms

Cited by 18 publications

References 49 publications

Founder's Financial Knowledge and the New Firm's Ability to Obtain Debt Financing

Founder's Financial Knowledge and the New Firm's Ability to Obtain Debt Financing

Lease Vs. Loan: Evidence from Bangladesh

Do firms lease to hedge? CEO risk‐taking and operating lease intensity

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