Decoding Finance Lease Trends: How Firm Life Cycle Stages Influence Leasing Decisions Globally

Ahmad Ghazali and Mubashar Tanveer

Audit and Accounting Review, 2024, vol. 4, issue 2, 1-34

Abstract: The current study aims to analyze the influence of Firm Life Cycle Stages (FLCS) on the finance lease decisions of non-financial and non-utility firms around the globe. Data is gathered from S&P Capital IQ Pro for the period of 2000–2023. The final sample consists of 72,031 firm-year observations, covering a broad range of non-financial and non-utility firms around the globe. To estimate the relationship between FLCS and finance leases, the current study employed Fixed Effects regression as the main method and Ordinary Least Squares (OLS) regression as a complementary method. Moreover, to confirm the consistency of findings across different model specifications, the robustness of results was tested by splitting the total finance lease into current and long-term portions. The regression results of both methods indicate that finance lease usage changes with FLCS in an inverted U-shaped pattern. This demonstrates the lower use of finance lease by firms in the introduction and decline stages and a higher use of finance lease in the growth and maturity stages. These findings are substantiated by robustness tests. Thus, the overall results prove that a finance lease is a flexible financial tool and firms adapt it according to the specific requirements of life cycle stages. The findings have implications for both investors and financial managers. This may help investors in evaluating their investment decisions when considering the consequences of finance lease adjustments. Moreover, it would also aid them in accomplishing the goal of shareholder wealth maximization through proactive and effective decision-making. In the future, this phenomenon may be examined separately for segments based on economic development or regions.

Keywords: asset acquisition; financing decision; finance lease; Firm Life Cycle Stages (FLCS) (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2024
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