Working Papers

WP198. Determinants of Polish Enterprises' Propensity to Lease

The paper identifies determinants of financing the purchase of tangible assets by Polish enter-prises with use of financial and operating lease. Analysis of financial lease was based on sta-tistical annual reports for the years 1995−2011 (about 50 thousands companies per year), while research of operating lease used half-year reports for the years 2007−2011, both with use of System GMM. The literature of the subject continuously pursues to explain the rela-tions between choosing a lease and other sources of capital, mainly bank loans. Therefore, the main focus of the study is on the dependence between the capital lease and the long-term bank loan, as well as on the relations between the operating lease, the short-term loan and the long-term debt-based financing with no financial lease element (net). The analyses indicate that medium-sized and large companies are more inclined to finance their assets with capital leas-es than small business and that large companies use more capital leases than small businesses do. It was found that a higher degree of the long-term loan financing results in a lower degree of capital leasing, which indicates the long-term bank loan and capital lease substitutability, similarly as reported by Marston & Harris (1988), Beattie, Goodacre & Thomson (2000), Singh (2011), as well as Lin et al. (2013). The findings for factors affecting the propensity to finance assets with operating leases proves the substitutability of an operating lease and a short-term bank loan, similarly as reported by Beattie, Goodacre & Thomson (2000), Filareto-Deghaye & Singh (2011), as well as Singh (2011).