Keywords: Durable Asset, Leasing, Collateral Channel, Real Estate
JEL Codes: D25, E22, G11, G31
학회소식
[2022년 5차 CAFM2022]Are All Durable Assets Created Equal? The Impact of Price Appreciation on Investment
작성자 : 관리자
조회수 : 315
게시일 :
2022-12-20
Firms acquiring durable assets face a decision to lease or purchase them. Under the collateral channel narrative, the extant literature argues that durability can either facilitate purchases by enhancing pledgeability or hinder them due to the large down payment required. Prior research has not considered that some durable assets such as real estate can persistently increase in price, and it does not endogenize a firm’s decision to lease the assets. This paper explicitly factors this capital gains possibility and leasing option into a firm’s optimal financing and investment decision. A financially constrained firm purchases durable assets expecting to benefit from a profitable resale. If leasing is feasible, it reverts to renting as its down payment burden becomes substantial.
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