Financial Reporting Quality, Private Information, Monitoring, and the Lease-versus-Buy Decision
Name
Weber_Financial reporting.pdf
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380.2 KB
Format
Adobe PDF
Checksum (MD5)
96486636fbcbe3e73fb38c9e131f5614
Author(s)
Weber, Joseph P.
Beatty, Anne
Liao, Scott
Date Issued
June 2010
Journal
Accounting Review
Publisher
American Accounting Association
Citation
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.
Version
Author's final manuscript
Abstract
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.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
https://doi.org/10.2308/accr.2010.85.4.1215
