Hostname: page-component-586b7cd67f-dsjbd Total loading time: 0 Render date: 2024-11-23T22:48:13.735Z Has data issue: false hasContentIssue false
  • English
  • Français

Sale-and-Leaseback Agreements and Enterprise Valuation

Published online by Cambridge University Press:  06 April 2009

E. Han Kim ,
Wilbur G. Lewellen  and
John J. McConnell
Get access Rights & Permissions [Opens in a new window]

Extract

The literature on leasing has generally concentrated on providing management with a selection criterion for the lease-versus-purchase decision; over the years, a variety of recommendations have been advanced ([1], [3], [6], [8], [16], and [18]). More recent papers, however, have shown that the terms of leasing contracts in a transaction-costless competitive capital market will inevitably be such as to render the stockholders of value-maximizing firms indifferent to that decision ([11] and [12]). Simply put, competition among potential lessors-together with the mandates of securities-price-equilibrating trading activities of investors in lessee and lessor firms—will necessarily drive the present values of the cash flows associated with lease arrangements to parity with direct asset purchase prices.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 5 , December 1978 , pp. 871 - 883
Copyright
Copyright © School of Business Administration, University of Washington 1978

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Beechy, T. “Quasi-Debt Analysis of Financial Leases.” Accounting Review 04 1969), pp. 375–381.Google Scholar
[2]Black, F., and Scholes, M.. “The Pricing of Options and Corporate Liabilities.” Journal of Political Economy (05–06 1973), pp. 637–654.CrossRefGoogle Scholar
[3]Bower, R. “Issues in Lease Financing.” Financial Management (Winter 1973), pp. 25–34.CrossRefGoogle Scholar
[4]Elton, E., and Gruber, M.. “Dynamic Programming Models in Finance.” Journal of Finance (05 1971), pp. 473–505.CrossRefGoogle Scholar
[5]Fama, E., and Miller, M.. The Theory of Finance. New York: Holt Rinehart and Winston (1972).Google Scholar
[6]Gordon, M. “A General Solution to the Buy or Lease Decision.” Journal of Finance (03 1974), pp. 245–250.CrossRefGoogle Scholar
[7]Haley, C, and Schall, L.. The Theory of Financial Decisions. New York: McGraw-Hill (1973).Google Scholar
[8]Johnson, R., and Lewellen, W.. “Analysis of the Lease-or-Buy Decision.” Journal of Finance (09 1972), pp. 815–823.Google Scholar
[9]Kim, H.; McConnell, J.; and Greenwood, P.. “Capital Structure Rearrangements and Me-First Rules in an Efficient Capital Market.” Journal of Finance (06 1977), pp. 789–810.Google Scholar
[10]Kraus, A. “The Bond Refunding Decision in an Efficient Market.” Journal of Financial and Quantitative Analysis (12 1973), pp. 783–806.Google Scholar
[11]Lewellen, W.; Long, M.; and McConnell, J.. “Asset Leasing in Competitive Capital Markets.” Journal of Finance (06 1976), pp. 787–798.CrossRefGoogle Scholar
[12]Miller, M., and Upton, C.. “Leasing, Buying, and the Cost of Capital Services.” Journal of Finance (06 1976), pp. 761–786.CrossRefGoogle Scholar
[13]Modigliani, F., and Miller, M.. “Corporation Income Taxes and the Cost of Capital: A Correction.” American Economic Review (06 1963), pp. 433–443.Google Scholar
[14]Myers, S.; Dill, D.; and Bautista, A.. “Valuation of Financial Lease Contracts.” Journal of Finance (06 1976), pp. 799–819.CrossRefGoogle Scholar
[15]Pye, G. “The Value of the Call Option on a Bond.” Journal of Political Economy (04 1966), pp. 200–205.CrossRefGoogle Scholar
[16]Sartoris, W., and Paul, R.. “Lease Evaluation-Another Capital Budgeting Decision.” Financial Management (Summer 1973), pp. 46–52.CrossRefGoogle Scholar
[17]Schall, L. “Asset Valuation, Firm Investment, and Firm Diversification.” Journal of Business (01 1972), pp. 11–28.CrossRefGoogle Scholar
[18]Schall, L.. “The Lease-or-Buy and Asset Acquisition Decisions.” Journal of Finance (09 1974), pp. 1203–1214.Google Scholar