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Incentive of Capital Lease: Financial Constrain or Financial Flexibility?
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TitleIncentive of Capital Lease: Financial Constrain or Financial Flexibility?  
AuthorMa Wenjie and Ding Jianping  
OrganizationShanghai University of Finance and Economics, 
Key WordsCapital-Lease; Financial-Flexibility; Financial-Constrain; Investment-Efficiency; Stochastic-Frontier-Analysis 
AbstractEmpirical studies based on China listed firm data from 2003 to 2012 show that, capital lease ratio is positively correlated with the firm size and negatively correlated with growth opportunities. These results are different with that from developed lease markets, which means the financial constrain cannot explain the leasing decision of Chinese firms very well. 90% market share of Chinese lease market are capital lease, especially lease back, which different from developed lease markets. Large firms have larger capacity for lease back. Our empirical studies show that, firms with low financial flexibilities lease more to improve their financial flexibilities. Furthermore, the lower financial flexibilities of firms are, the stronger the marginal effects of firm size on lease ratio are. On the other hand, based on quasi natural experiments and Difference-In-Difference method, we find that the investment efficiencies of firms are improved after leasing, which implies the financial flexibilities of firms are improved and under investments are alleviated after leasing. These empirical results imply that, the financial flexibilities of firms are the key factors affecting the lease decisions of Chinese firms, lease in China has not been the tool to alleviate the financial constrain, authorities should stimulate the development of operating lease. Our researches are helpful to the leasing theories and developments of Chinese lease industry. 
Serial NumberWP835 
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