Lease Financing and Corporate Governance

35 Pages Posted: 14 Jul 2008

See all articles by Sara H. Robicheaux

Sara H. Robicheaux

Birmingham-Southern College

Xudong Fu

University of Louisville

James A. Ligon

University of Alabama


Lease financing is a well-recognized mechanism for reducing the agency costs of debt. This study examines whether firms that attempt to control the agency costs of equity through strong governance structures, including Chief Executive Officer compensation alignment and board structure, are more likely to use an agency cost reducing debt structure, such as leasing. For a sample of large firms, we find that firms who use more incentive compensation and have more outside directors also tend to use more lease financing, suggesting these agency cost reducing measures are complements.

JEL Classification: D82, G32, G34, J33

Suggested Citation

Robicheaux, Sara H. and Fu, Xudong and Ligon, James A., Lease Financing and Corporate Governance. Financial Review, Vol. 43, No. 3, pp. 403-437, August 2008. Available at SSRN: or

Sara H. Robicheaux (Contact Author)

Birmingham-Southern College ( email )

BSC Box 549023
900 Arkadelphia Road
Birmingam, AL 35254
United States

Xudong Fu

University of Louisville ( email )

Louisville, KY 40292
United States

James A. Ligon

University of Alabama ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-6313 (Phone)
205-348-0590 (Fax)

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