Some empirical evidence on the use of financial leases

In this paper, the impact of certain firm‐specific factors on the level of financial leases used by corporations is examined. An industry analysis indicates that firms in certain industries tend to lease more than other firms. A Tobit analysis of the degree to which approximately 600 firms lease assets indicates that certain factors–including the debt ratio, presence of mortgage debt, level of subordinated debt, presence of restrictions on leasing, number of bonds in a firm's capital structure, and the firm's debt rating–are significantly related to the degree of leasing. Other factors, including the firm's tax rate, were not found to be significant, contrary to popular expectations.