Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision
A flourishing stream of research suggests that liquidity-constrained firms with low accounting quality have limited access to capital for investments. We extend this research by investigating whether these firms are more likely to lease their assets. Lessors’ superior control rights allow them to pr...
| Main Authors: | , , |
|---|---|
| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
American Accounting Association
2013
|
| Online Access: | http://hdl.handle.net/1721.1/76295 https://orcid.org/0000-0002-2221-5198 |
| _version_ | 1826190621472194560 |
|---|---|
| author | Weber, Joseph P. Beatty, Anne Liao, Scott |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Weber, Joseph P. Beatty, Anne Liao, Scott |
| author_sort | Weber, Joseph P. |
| collection | MIT |
| description | A flourishing stream of research suggests that liquidity-constrained firms with low accounting quality have limited access to capital for investments. We extend this research by investigating whether these firms are more likely to lease their assets. Lessors’ superior control rights allow them to provide capital to constrained firms with low-quality accounting reports. Consistent with this conjecture, we find that low accounting quality firms have a higher propensity to lease than purchase assets. To verify that leasing does not merely reflect these firms’ desire for off-balance-sheet accounting, we investigate whether banks’ access to private information and monitoring affect the relation between accounting quality and leasing. We find the association between accounting quality and leasing decreases when banks have higher monitoring incentives and when loans contain capital expenditure provisions. These results suggest that other mechanisms can substitute for the role of accounting quality in reducing information problems. |
| first_indexed | 2024-09-23T08:43:09Z |
| format | Article |
| id | mit-1721.1/76295 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T08:43:09Z |
| publishDate | 2013 |
| publisher | American Accounting Association |
| record_format | dspace |
| spelling | mit-1721.1/762952022-09-23T14:04:57Z Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision Weber, Joseph P. Beatty, Anne Liao, Scott Sloan School of Management Weber, Joseph P. A flourishing stream of research suggests that liquidity-constrained firms with low accounting quality have limited access to capital for investments. We extend this research by investigating whether these firms are more likely to lease their assets. Lessors’ superior control rights allow them to provide capital to constrained firms with low-quality accounting reports. Consistent with this conjecture, we find that low accounting quality firms have a higher propensity to lease than purchase assets. To verify that leasing does not merely reflect these firms’ desire for off-balance-sheet accounting, we investigate whether banks’ access to private information and monitoring affect the relation between accounting quality and leasing. We find the association between accounting quality and leasing decreases when banks have higher monitoring incentives and when loans contain capital expenditure provisions. These results suggest that other mechanisms can substitute for the role of accounting quality in reducing information problems. 2013-01-17T21:53:26Z 2013-01-17T21:53:26Z 2010-06 2008-08 Article http://purl.org/eprint/type/JournalArticle 0001-4826 1558-7967 http://hdl.handle.net/1721.1/76295 Beatty, Anne, Scott Liao, and Joseph Weber. “Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision.” The Accounting Review 85.4 (2010): 1215–1238. https://orcid.org/0000-0002-2221-5198 en_US http://dx.doi.org/10.2308/accr.2010.85.4.1215 Accounting Review Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf American Accounting Association SSRN |
| spellingShingle | Weber, Joseph P. Beatty, Anne Liao, Scott Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision |
| title | Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision |
| title_full | Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision |
| title_fullStr | Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision |
| title_full_unstemmed | Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision |
| title_short | Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision |
| title_sort | financial reporting quality private information monitoring and the lease versus buy decision |
| url | http://hdl.handle.net/1721.1/76295 https://orcid.org/0000-0002-2221-5198 |
| work_keys_str_mv | AT weberjosephp financialreportingqualityprivateinformationmonitoringandtheleaseversusbuydecision AT beattyanne financialreportingqualityprivateinformationmonitoringandtheleaseversusbuydecision AT liaoscott financialreportingqualityprivateinformationmonitoringandtheleaseversusbuydecision |