Leasing and Secondary Markets: Theory and Evidence from Commercial Aircraft
AbstractI 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.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 119 (2011)
Issue (Month): 2 ()
Pages: 325 - 377
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Web page: http://www.journals.uchicago.edu/JPE/
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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