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Asset liquidity and financial contracts: Evidence from aircraft leases

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  • Gavazza, Alessandro

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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 95 (2010)
Issue (Month): 1 (January)
Pages: 62-84

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Handle: RePEc:eee:jfinec:v:95:y:2010:i:1:p:62-84

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Web page: http://www.elsevier.com/locate/inca/505576

Related research

Keywords: Leasing Collateral Asset liquidity;

References

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Citations

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Cited by:
  1. Myrto Kalouptsidi, 2011. "Time to Build and Shipping Prices," 2011 Meeting Papers 661, Society for Economic Dynamics.
  2. Bar-Isaac, Heski & Gavazza, Alessandro, 2013. "Brokers' contractual arrangements in the Manhattan residential rental market," MPRA Paper 43967, University Library of Munich, Germany.
  3. Golbeck, Steven & Linetsky, Vadim, 2013. "Asset financing with credit risk," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 43-59.
  4. Jesse Edgerton, 2011. "Agency problems in public firms: evidence from corporate jets in leveraged buyouts," Finance and Economics Discussion Series 2011-15, Board of Governors of the Federal Reserve System (U.S.).
  5. Toni Beutler & Mathieu Grobéty, 2011. "The Collateral Channel under Imperfect Debt Enforcement," Working Papers 11.11, Swiss National Bank, Study Center Gerzensee.
  6. Gal, Peter & Pinter, Gabor, 2013. "Capital over the business cycle: renting versus ownership," Bank of England working papers 478, Bank of England.
  7. Efraim Benmelech & Nittai K. Bergman, 2011. "Bankruptcy and the Collateral Channel," Journal of Finance, American Finance Association, vol. 66(2), pages 337-378, 04.
  8. Rampini, Adriano A. & Sufi, Amir & Viswanathan, S., 2014. "Dynamic risk management," Journal of Financial Economics, Elsevier, vol. 111(2), pages 271-296.
  9. Benmelech, Efraim & Bergman, Nittai K., 2011. "Vintage capital and creditor protection," Journal of Financial Economics, Elsevier, vol. 99(2), pages 308-332, February.
  10. Lee, Chyn-Hwa & Hooy, Chee-Wooi, 2012. "Determinants of systematic financial risk exposures of airlines in North America, Europe and Asia," Journal of Air Transport Management, Elsevier, vol. 24(C), pages 31-35.
  11. Gavazza, Alessandro, 2010. "The role of trading frictions in real asset markets," MPRA Paper 25781, University Library of Munich, Germany.
  12. Vittoria Cerasi & Alessandro Fedele & Raffaele Miniaci, 2013. "Product market competition and collateralized debt," Working Papers 238, University of Milano-Bicocca, Department of Economics, revised Mar 2013.

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