Asset Liquidity and Financial Contracts: Evidence from Aircraft Leases

By Alessandro Gavazza. 2010

127 citations recorded by the source corpus.

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.

Subfields: Accounting, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/336e2a0d3eb83380c54571d6b8f697559fe6afe0

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In Management Science and Operations Research

Citations in the corpus

Leasing and Secondary Markets: Theory and Evidence from Commercial Aircraft (2011, unknown): “rVO (z, 0) = λ (max {VO (z, 1) ,W (z, 1) + p− T} − VO (z, 0)) , (12) rVL (z, 0) = −l + λ (max {VO (z, 1)− p, VL (z, 1) ,W (z, 1)} − VL (z, 0)) , (13) rW (z, 1) = μ (W (z, 0)−W (z, 1)) + (14)”
Dynamic Risk Management (2014, background): “…literature emphasizes the importance of leasing for financially constrained firms in general (see Sharpe and Nguyen, 1995; Eisfeldt and Rampini, 2009; Rampini and Viswanathan, 2013; and Rauh and Sufi, 2012) and for airlines in particular (see Benmelech and Bergman, 2008; and Gavazza, 2010, 2011).”