Lease-adjusted productivity measurement

Weiwei Hu, Kai Li and Yiming Xu

Journal of Banking & Finance, 2024, vol. 164, issue C

Abstract: We document that leased capital constitutes about 30% of the total productive physical assets used by US public firms. We develop an analytical framework to demonstrate how the neglect of leases leads to an overestimation of productivity. This overestimation can be decomposed into two distinct channels: one arises from the mismeasured factor share, and the other from the omitted-leased-capital channel. Empirically, we find that the overestimation of aggregate productivity is substantial, has been increasing over time, and exhibits strong countercyclicality. In the cross-section, the decomposition of overestimation presents asymmetric patterns for firms of different sizes and levels of financial constraint. Our findings highlight the critical importance of explicitly accounting for the “unmeasured” leased capital in studies on productivity measurements.

Keywords: Operating lease; Leased capital; Productivity; Mismeasurement (search for similar items in EconPapers)
JEL-codes: D24 E2 O4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:164:y:2024:i:c:s0378426624000414

DOI: 10.1016/j.jbankfin.2024.107121

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