The Leasing Decisions of Small, Privately Held Firms

33 Pages Posted: 25 May 2016 Last revised: 20 Jun 2017

See all articles by Carmen Cotei

Carmen Cotei

University of Hartford - Department of Economics, Finance & Insurance

Joseph B. Farhat

Central Connecticut State University - Department of Finance

Date Written: May 21, 2016

Abstract

We analyze the impact of firm’s asset uniqueness and its growth opportunities on the leasing decisions of U.S. startups. To test our hypotheses, we use a unique dataset provided by the Kauffman Foundation. Our results show that startups in the high-technology sector have a lower propensity to lease whereas startups with high R&D intensity have a higher propensity to lease. In addition, we examine the impact of owners’ characteristics on the decisions to lease and find that female and older entrepreneurs as well as highly educated owners are less likely to lease. Our findings confirm previous studies on leasing decisions that larger and more leveraged businesses have a higher propensity to lease their assets. Consistent with Ang and Peterson (1984) and Bathala and Mukerjee (1995) we report that leasing and debt are complements rather than substitutes to each other.

Keywords: Leasing, Startups, Asset Specificity, R&D Intensity, Survey Methodology

JEL Classification: G24, G34, M13, C83, G32, O31, O32

Suggested Citation

Cotei, Carmen and Farhat, Joseph, The Leasing Decisions of Small, Privately Held Firms (May 21, 2016). Review of Pacific Basin Financial Markets and Policies (RPBFMP), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2782794 or http://dx.doi.org/10.2139/ssrn.2782794

Carmen Cotei

University of Hartford - Department of Economics, Finance & Insurance ( email )

United States

Joseph Farhat (Contact Author)

Central Connecticut State University - Department of Finance ( email )

1615 Stanley Street
New Britian, CT 06050
United States

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