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Asset liquidity and financial contracts: Evidence from aircraft leases

Gavazza, Alessandro (2010) Asset liquidity and financial contracts: Evidence from aircraft leases. Journal of Financial Economics, 95 (1). pp. 62-84. ISSN 0304-405X

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Identification Number: 10.1016/j.jfineco.2009.01.004

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.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-financ...
Additional Information: © 2008 Elsevier B.V.
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 17 Feb 2014 16:53
Last Modified: 20 Feb 2019 09:41
URI: http://eprints.lse.ac.uk/id/eprint/55704

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