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Operating lease obligations and corporate cash management

Author

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  • Cook, Douglas O.
  • Kieschnick, Robert
  • Moussawi, Rabih

Abstract

Our study addresses two issues overlooked in prior research: Does a firm's future operating lease obligations influence its current cash holdings? Does this relationship contribute to the temporal increase in corporate cash holdings? We provide evidence that these future obligations significantly influence a firm's cash holdings and contribute to the temporal increase in U.S. corporate cash holdings. Consequently, our findings are consistent with the options offered by operating leases to young growing firms and the effect of these operating lease obligations on the firm's operating leverage.

Suggested Citation

  • Cook, Douglas O. & Kieschnick, Robert & Moussawi, Rabih, 2021. "Operating lease obligations and corporate cash management," Journal of Corporate Finance, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:corfin:v:69:y:2021:i:c:s0929119921001292
    DOI: 10.1016/j.jcorpfin.2021.102008
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    References listed on IDEAS

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    1. José A. Azar & Jean-François Kagy & Martin C. Schmalz, 2016. "Can Changes in the Cost of Carry Explain the Dynamics of Corporate "Cash" Holdings?," The Review of Financial Studies, Society for Financial Studies, vol. 29(8), pages 2194-2240.
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    Cited by:

    1. Ge, Jianjun & Li, Donghui & Ni, Yingzhao & Yang, Shijie, 2022. "Inflexibility and corporate innovation: Cross-country evidence," Journal of Multinational Financial Management, Elsevier, vol. 64(C).
    2. Almaghrabi, Khadija S., 2023. "Non‐operating risk and cash holdings: Evidence from pension risk," Journal of Banking & Finance, Elsevier, vol. 152(C).
    3. Cook, Douglas O. & Via, M. Tony, 2023. "Organizational capital and firm risk – Testing the outside option," Finance Research Letters, Elsevier, vol. 51(C).
    4. Kiet Tuan Duong & Luu Duc Toan Huynh, 2024. "Extreme weather and corporate fixed asset policies: leasing as alternative finance," Working Papers 116, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.

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    More about this item

    Keywords

    Operating leases; Cash; Off-balance sheet;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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