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Title: Firm-Specific Determinants of Off-Balance Sheet Leasing: A Test of the Smith/Wakeman Model

Authors: Joanne C. Duke; David P. Franz; Herbert G. Hunt III; Daniel R. Toy

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: While operating leases continue to grow in popularity in the U.S., researchers have limited knowledge about the factors that drive some firms to lease assets and other firms to use alternative financing arrangements. This study empirically tests some of the firm-specific variables that have been theoretically linked to operating leases in prior studies. Consistent with theoretical predictions, we find a negative relation between effective tax rate and operating leases, and a positive relation between operating leases and ownership concentration, restrictive financial contracting variables, and the debt/equity ratio. However, we are unable to detect a connection between operating leases and earnings-based management compensation.

Keywords: Off-balance sheet leasing; firm-specific determinants; Smith/Wakeman model; operating leases; financial contracting.

DOI: 10.1504/JBM.2002.141090

Journal of Business and Management, 2002 Vol.8 No.4, pp.335 - 353

Published online: 05 Sep 2024 *