Asset liquidity and financial contracts: Evidence from aircraft leases

Alessandro Gavazza

Journal of Financial Economics, 2010, vol. 95, issue 1, 62-84

Abstract: Financial contracting theories agree that more-liquid assets decrease the expected cost of external financing, thus making leasing more attractive and reducing lessors' equilibrium return. However, the literature has ambiguous predictions about the effect of liquidity on the maturity of leases. These predictions are further complicated by the existence of two types of lease contracts--operating and capital--that differ in whether asset ownership transfers to the lessee at the end of the contract. Using data from commercial aircraft, I find that more-liquid assets (1) make leasing, operating leasing in particular, more likely; (2) have shorter operating leases; (3) have longer capital leases; and (4) command lower markups of operating lease rates.

Keywords: Leasing; Collateral; Asset; liquidity (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304-405X(09)00165-2
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:95:y:2010:i:1:p:62-84

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().