Leasing and Secondary Markets: Theory and Evidence from Commercial Aircraft
Abstract
I develop a model of costly capital reallocation to understand how leasing reduces trading frictions. Leased assets trade more frequently and produce more output than owned assets because (1) high-volatility firms are more likely to lease than low-volatility firms and (2) firms shed leased asssets faster than owned assets amid productivity shocks because of lower transaction costs. Commercial aircraft data show that leased aircraft have holding durations 38 percent shorter and fly 6.5 percent more hours than owned aircraft. These differences arise primarily because when profitability declines, carriers keep owned aircraft and return leased aircraft, which lessors redeploy to more productive operators.Download Info
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Bibliographic Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 119 (2011)
Issue (Month): 2 ()
Pages: 325 - 377
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JPE/
Related research
Keywords:Other versions of this item:
- Gavazza, Alessandro, 2010. "Leasing and Secondary Markets: Theory and Evidence from Commercial Aircraft," MPRA Paper 28821, University Library of Munich, Germany.
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Nikita Roketskiy & Alessandro Lizzeri & Alessandro Gavazza, 2012.
"A Quantitative Analysis of the Used Car Market,"
2012 Meeting Papers
173, Society for Economic Dynamics.
- Gavazza, Alessandro & Lizzeri, Alessandro & Rokestkiy, Nikita, 2012. "A quantitative analysis of the used-car market," MPRA Paper 38414, University Library of Munich, Germany.
- Gavazza, Alessandro, 2010. "Asset liquidity and financial contracts: Evidence from aircraft leases," Journal of Financial Economics, Elsevier, vol. 95(1), pages 62-84, January.
- Myrto Kalouptsidi, 2011. "Time to Build and Shipping Prices," 2011 Meeting Papers 661, Society for Economic Dynamics.
- Gavazza, Alessandro, 2010.
"The role of trading frictions in real asset markets,"
MPRA Paper
25781, University Library of Munich, Germany.
- Alessandro Gavazza, 2011. "The Role of Trading Frictions in Real Asset Markets," American Economic Review, American Economic Association, vol. 101(4), pages 1106-43, June.
- Chemmanur, Thomas & Jiao, Yawen & Yan, An, 2010. "A theory of contractual provisions in leasing," Journal of Financial Intermediation, Elsevier, vol. 19(1), pages 116-142, January.
- Gordon M. Phillips & Giorgo Sertsios, 2011. "How Do Firm Financial Conditions Affect Product Quality and Pricing?," NBER Working Papers 17233, National Bureau of Economic Research, Inc.
- Anders, Christoph, 2010. "Auswirkungen des Leasings auf Transaktionskosten," Leasing - Wissenschaft & Praxis, Universität zu Köln, Forschungsinstitut für Leasing, vol. 8(2), pages 71-88.
- Andrea L. Eisfeldt & Adriano A. Rampini, 2009.
"Leasing, Ability to Repossess, and Debt Capacity,"
Review of Financial Studies,
Society for Financial Studies, vol. 22(4), pages 1621-1657, April.
- Adriano Rampini & Andrea Eisfeldt, 2007. "Leasing, Ability to Repossess, and Debt Capacity," Working Papers 07-19, Center for Economic Studies, U.S. Census Bureau.
- Andrea Eisfeldt & Adriano Rampini, 2006. "Leasing, Ability to Repossess, and Debt Capacity," 2006 Meeting Papers 461, Society for Economic Dynamics.
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