This paper argues leasing is a risk-sharing mechanism: risk-tolerant lessors (capital owners) provide insurance to … financially constrained risk-averse lessees (capital borrowers) against systematic capital price fluctuations. We provide strong … empirical evidence to support this novel risk premium channel. Among financially constrained stocks, firms with a high leased …

Leasing is one of the most important sources of external finance to corporate firms. This paper develops a dynamic … model to investigate the role of uncertainty and financial constraint in understanding the leasing decisions of corporate …. Because of the agency costs originated from the separation of ownership and control, leasing is a more costly way of financing …