Abstract

http://ssrn.com/abstract=1680077
 
 

References (131)



 
 

Citations (2)



 


 



Bringing Leased Assets onto the Balance Sheet


Kimberly Rodgers Cornaggia


American University - Kogod School of Business

Laurel Franzen


Loyola Marymount University

Timothy T. Simin


Pennsylvania State University

June 15, 2013

Journal of Corporate Finance 22, 345-360.

Abstract:     
Pending changes in lease accounting standards will require firms to recognize obligations that have historically been kept off-balance-sheet (OBS). We examine the implications of this accounting treatment for a host of common risk and performance metrics. Conventional leverage, Z-Score, levered beta, return on capital and other asset utilization measures underestimate risk and overstate performance of firms relying heavily on OBS leasing. The distortion affects relative rankings as well as average levels and has increased over time. Proposed changes in reporting standards aim to mitigate future distortion, but necessitate adjustments for time-series comparisons. Under current reporting standards, investors, analysts, and researchers can estimate leased asset value and adjust accounting-based metrics to better reflect these fixed costs.

Number of Pages in PDF File: 44

Keywords: Accounting performance, Capital structure, Financial risk, Lease financing, Off-Balance-Sheet, Risk metrics

JEL Classification: G32, M41, M48

Accepted Paper Series


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Date posted: September 21, 2010 ; Last revised: March 18, 2014

Suggested Citation

Cornaggia, Kimberly Rodgers and Franzen, Laurel and Simin, Timothy T., Bringing Leased Assets onto the Balance Sheet (June 15, 2013). Journal of Corporate Finance 22, 345-360.. Available at SSRN: http://ssrn.com/abstract=1680077 or http://dx.doi.org/10.2139/ssrn.1680077

Contact Information

Kimberly Rodgers Cornaggia
American University - Kogod School of Business ( email )
4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
Laurel Franzen (Contact Author)
Loyola Marymount University ( email )
7900 Loyola Boulevard
Los Angeles, CA 90045
United States
Timothy T. Simin
Pennsylvania State University ( email )
University Park, PA 16802
United States
814-865-3457 (Phone)
HOME PAGE: http://timsimin.net
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