Determinants of Financial Leasing Development in Jordan
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Published
Sep 1, 2008
Abstract
Lease finance is being used increasingly to acquire items of industrial equipment where use is more crucial than ownership. The study presents a comprehensive overview on the state of the leasing market in Jordan in terms of legislations and market share. In addition, considerable attention is paid to the analysis of the tax & accounting, legal, and marketing variables impact on leasing the industrial items from the industrial companies point view as a possible lessees. OLS model used for testing the study hypothesis. The study relies on collecting the data by using the questionnaire approach developed by the researcher in addition to personal interviews. Overall, 154 questionnaires were distributed on the Jordanian industrial companies listed on Amman Stock Exchange (ASE). The questionnaires returned back were 65%. Selected statistical tests were used to check whether the data meets the model assumptions, such as normality, autocorrolation, multicollinearity tests. In addition, Cronbach Alpha test was applied to check the suitability and credibility of the questionnaire. The study results show that all explanatory variables had significant positive influence on the dependent variable (i.e. the use of lease finance). Therefore, the researchers recommend paying more attention on such variables for enhancing the use of lease finance market since such effort will influence the ultimate economic growth required.
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Keywords
Financial Leasing
References
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• Adedeji, A.; and R. C. Stapleton (1996), "Leases, Debt and Taxable Capacity," Applied Financial Economics, 6, PP. 71-83.
• AI Rai, Daily Magazine (2007), "Financial Leasing: History and Present," in Alrai Daily Magazine Vol. No. 13354.
• Anderson, P. F. (1980), "Leasing: An Industrial Marketing Tool," in Unpublished manuscript provided by the American Association of Equipment Lessors.
• Arab Bank (2006): www.arabbank.com.
• ASE (2008), "Jordanian Shareholding Companies Guide." Amman- Jordan: Amman Stock Exchange.
• Barclay, M. J.; and C. W. Smith (1995), "The Priority Structure of Corporate Liabilities," Journal of Finance, 50, PP. 889-917.
• Bathala, C. T.; and T. K. Mukherjee (1995), "A Survey of Leasing in Small Firms," Journal of Small Business Finance, 4, PP. 113-27.
• Beattie, V.;, A.; Goodacre, and S. Thomas (2000), "Operating Leases and the Assessment of Lease-Debt Substitutability," Journal of Banking & Finance, 24, PP. 427-70.
• Brick, I. E.;, W.; Fung, and M. Subrahmanyam (1987), "Leasing and Financial Intermediation: Comparative Tax Advantages," Financial Management, PP. 55-59.
• Brigham, E. F.; and L. C. Gapenski (1985), Financial Management (4th ed.). New York, N.Y.: The Dryden Press.
• CBJ, Central Bank of Jordan (2005), "Annual Report." Amman: Central Bank of Jordan. ---- (2007), "Atmual Report." Amman: Central Bank of Jordan.
• DOS (2007), "Department of Statistics Yearly Statistical Series." Jordan - Amman: Department of Statistics (DOS).
• Eades, K. M.; and F. C. Marston (2002), "Incentives for Leasing: Evidence from the Largest US Lessees and Lessors," Working Paper, University of Virginia.
• Euromoney (2006), "World Leasing Yearbook."
• Finucane, T. J. (1988), "Some Empirical Evidence on the Use of Financial Leases," Journal ofFinancial Research, PP. 321-33.
• Gao, SimonS. (1995), "Leasing in Poland- Privatization, Financing, and Current Problems," European Business Review, 5, PP. 31-39.
• Gao, Simon S.; and E. Wilson Hebbert (1996), "Lease Finance in Emerging Markets: An Eastern European Study," Managerial Finance, 22 (12), PP. 39-49.
• Graham, J. R. (2003), "Taxes and Corporate Finance: A Review," Review of Financial Studies, 16, PP. 1075-129.
• Graham, J. R.;, L. L.; Michael, and S. S. James (1998), "Debt, Leases, Taxes, and the Endogeneity of Corporate Tax Status," Journal of Finance, 53, PP. 131-62.
• IFC, International Finance Corporation (2006), "A Study of the Leasing Market in the Hashimate Kingdom of Jordan." Amman: World Bank Group.
• Jordan Investment Board (2007): www.jordaninvestment.com.
• Jordanian Islamic Bank (2007): www.jordanislamicbank.com.
• Judge, G., W. Griffiths, R. Hill, H. Lutkepohl, and T. Lee (1985), The Theory and Practice of Econometrics (2nd ed.). U.S.A- New York: John Wiley & Sons.
• Kieso, D. E.; and J. J. Weygandt (1998), Intermediate Accounting (9th ed.). New York, N.Y.: John Wiley & Sons, Inc.
• Kinnear, P. R. and C. D. Gray (1995), SPSS for Windows Made Simple. Erlbasm - UK: Taylor and Francis Publishers.
• Krahan, J. P.; and G. Meran ( 198 7), Why leasing? An Introduction to Comparative Contractual Analysis. Berlin: Bamberg, G. & Spremann, K., eds.
• Kraljic, A. P. (1990), "The Economic Gap Separating East and West," Columbia Journal of World Business, PP. 14-19.
• Krishnan, V. S.; and R. C. Moyer (1994), "Bankruptcy Costs and the Financial Leasing Decision," Financial Management, Vol. 23 (No.2), PP. 31-42.
• Lasfer, M.A.; and M. Levis (1998), "The Determinants of the Leasing Decision of Small and Large Companies," European Financial Management, 4, PP. 159-84.
• Lasfer, Meziane (2007), "On the Financial Drivers and Implications of Leasing Real Estate Assets: The Donaldsons-Lasfer's Curve," Journal of Corporate Real Estate, 9 (2), PP. 72-94.
• Lease, R. C.;, J. J.; McConnell, and J. S. Schallheim (1990), "Realized Returns and the Default Prepayment Experience of Financial Leasing Contracts," Financial Management, PP. 11-20.
• Lewis, C. M.; and J. S. Schallheim (1992), "Are Debt and Leases Substitutes?," Journal of Financial and Quantitative Analysis, PP. 497-511.
• LFG, London Financial Group (1996), "Euromoney Publication: World Leasing Yearbook." U.K., London: London Financial Group.
• Lowe, J. F.; , Morgan;, and Tomkins C. R. (1980), "Lease Finance in Industrial Markets," Management and Decision Economics, 1 (3), PP. 150-56.
• Maddala, G. S. (2001), Introduction to Econometrics (3rd ed.). UK- Sussex: John Wiley & Sons Ltd.
• Malone, D., C. Fries, and T. Jones (1993), "An Empirical Investigation of the Extent of Disclosure in the Oil and Gas Industry," Journal of Accounting, Auditing and Finance, Vol. 8 (No. 3), PP. 249-73.
• Marston, F.; and R. S. Harris (1988), "Substitutability of Leases and Debt in Corporate Capital Structure," Journal of Accounting, Auditing & Finance, PP. 147-69.
• McAdam, M. Bruce (1988), "Equipment Leasing: An Integral Part of Financial Services," Business Economics, 23 (3), PP. 43-47.
• Merhan, Hamed;, R. A.; Taggart, and D. Yermack (1999), "CEO Ownership, Leasing, and Debt Financing," Financial Management, 28, PP. 5-14.
• Ministry of lndustry and Trade (2007): www.mit.gov.jo.
• Ministry of Planning (2007): www.mop.gov.jo.
• Mukherjee, T. K. ( 1991 ), "A Survey of Corporate Leasing Analysis," Financial Management, 20, PP. 96-107.
• Myers, S. C. (1977), "Determination of Corporate Borrowing," Journal of Financial Economics, 5, PP. 147-75.
• Norusis, M. J. (1995), SPSS 6.1 Guide to Data Analysis: Prentice-Hall Englewood Cliffs, NJ.
• Ross, L.; and C. Stephen (2001), "The Leasing Industry's Legal Environment Improves," The China Business Review, January-February, PP. 48-51.
• Schallheim, J. S.;, R. E.; Johnson, R.C.; Lease, and McConnell (1987), "The Determinants of Yields on Financial Leasing Contracts," Journal of Financial Economics, PP. 45-67.
• Sharpe, S. A.; and H. H. Nguyen (1995), "Capital Market Imperfection and the Incentive to
• Lease," Journal of Financial Economics, 39 (PP. 271-94).
• Smith, C. W.; and L. M. Wakeman (1985), "Determinants of Corporate Leasing Policy," Journal of Finance, PP. 895-908.
• Street, D. L. and S. M. Bryant (2000), "Disclosure Level and Compliance with lASs: A Comparison of Companies with and without U.S. Listing and Filings'," The International Journal of Accounting, Vol. 35 (No.3).
• Stulz, R. M.; and H. Johnson (1985), "An Analysis of Secured Debt," Journal of Financial Economics, PP. 501-21.
• Thomas, R. L. (1997), Modem Econometrics: An Introduction (2nd ed.). England- Essex: Wesley Longman Limited.
• Vora, P. P.; and J. R. Ezzell (1991), "Leasing vs. Purchasing: Direct Evidence on a Corporation's Motivations for Leasing and Consequences of Leasing," Pennsylvania State University Working Paper.
• Wallace, R. S. 0. andK. Naser(l995), "Firm-Specific Determinants of the Comprehensiveness of Mandatory Disclosure in the Corporate Annual Reports of Firms Listed on the Stock Exchange of Hong Kong," Journal of Accounting and Public Policy, Vol. 14, PP. 311-68.
• Wallace, R. S. 0., K. Naser, and A. Mora (1994), "The Relationship between the Comprehensiveness of Corporate Annual Reports and Firm Characteristics in Spain," Accounting and Business Research, Vol. 25 (No. 97), PP. 41-53.
• Williamson, 0. E. (1988), "Corporate Finance and Corporate Governance," Journal of Finance, 43, PP. 41-47.
• Adedeji, A.; and R. C. Stapleton (1996), "Leases, Debt and Taxable Capacity," Applied Financial Economics, 6, PP. 71-83.
• AI Rai, Daily Magazine (2007), "Financial Leasing: History and Present," in Alrai Daily Magazine Vol. No. 13354.
• Anderson, P. F. (1980), "Leasing: An Industrial Marketing Tool," in Unpublished manuscript provided by the American Association of Equipment Lessors.
• Arab Bank (2006): www.arabbank.com.
• ASE (2008), "Jordanian Shareholding Companies Guide." Amman- Jordan: Amman Stock Exchange.
• Barclay, M. J.; and C. W. Smith (1995), "The Priority Structure of Corporate Liabilities," Journal of Finance, 50, PP. 889-917.
• Bathala, C. T.; and T. K. Mukherjee (1995), "A Survey of Leasing in Small Firms," Journal of Small Business Finance, 4, PP. 113-27.
• Beattie, V.;, A.; Goodacre, and S. Thomas (2000), "Operating Leases and the Assessment of Lease-Debt Substitutability," Journal of Banking & Finance, 24, PP. 427-70.
• Brick, I. E.;, W.; Fung, and M. Subrahmanyam (1987), "Leasing and Financial Intermediation: Comparative Tax Advantages," Financial Management, PP. 55-59.
• Brigham, E. F.; and L. C. Gapenski (1985), Financial Management (4th ed.). New York, N.Y.: The Dryden Press.
• CBJ, Central Bank of Jordan (2005), "Annual Report." Amman: Central Bank of Jordan. ---- (2007), "Atmual Report." Amman: Central Bank of Jordan.
• DOS (2007), "Department of Statistics Yearly Statistical Series." Jordan - Amman: Department of Statistics (DOS).
• Eades, K. M.; and F. C. Marston (2002), "Incentives for Leasing: Evidence from the Largest US Lessees and Lessors," Working Paper, University of Virginia.
• Euromoney (2006), "World Leasing Yearbook."
• Finucane, T. J. (1988), "Some Empirical Evidence on the Use of Financial Leases," Journal ofFinancial Research, PP. 321-33.
• Gao, SimonS. (1995), "Leasing in Poland- Privatization, Financing, and Current Problems," European Business Review, 5, PP. 31-39.
• Gao, Simon S.; and E. Wilson Hebbert (1996), "Lease Finance in Emerging Markets: An Eastern European Study," Managerial Finance, 22 (12), PP. 39-49.
• Graham, J. R. (2003), "Taxes and Corporate Finance: A Review," Review of Financial Studies, 16, PP. 1075-129.
• Graham, J. R.;, L. L.; Michael, and S. S. James (1998), "Debt, Leases, Taxes, and the Endogeneity of Corporate Tax Status," Journal of Finance, 53, PP. 131-62.
• IFC, International Finance Corporation (2006), "A Study of the Leasing Market in the Hashimate Kingdom of Jordan." Amman: World Bank Group.
• Jordan Investment Board (2007): www.jordaninvestment.com.
• Jordanian Islamic Bank (2007): www.jordanislamicbank.com.
• Judge, G., W. Griffiths, R. Hill, H. Lutkepohl, and T. Lee (1985), The Theory and Practice of Econometrics (2nd ed.). U.S.A- New York: John Wiley & Sons.
• Kieso, D. E.; and J. J. Weygandt (1998), Intermediate Accounting (9th ed.). New York, N.Y.: John Wiley & Sons, Inc.
• Kinnear, P. R. and C. D. Gray (1995), SPSS for Windows Made Simple. Erlbasm - UK: Taylor and Francis Publishers.
• Krahan, J. P.; and G. Meran ( 198 7), Why leasing? An Introduction to Comparative Contractual Analysis. Berlin: Bamberg, G. & Spremann, K., eds.
• Kraljic, A. P. (1990), "The Economic Gap Separating East and West," Columbia Journal of World Business, PP. 14-19.
• Krishnan, V. S.; and R. C. Moyer (1994), "Bankruptcy Costs and the Financial Leasing Decision," Financial Management, Vol. 23 (No.2), PP. 31-42.
• Lasfer, M.A.; and M. Levis (1998), "The Determinants of the Leasing Decision of Small and Large Companies," European Financial Management, 4, PP. 159-84.
• Lasfer, Meziane (2007), "On the Financial Drivers and Implications of Leasing Real Estate Assets: The Donaldsons-Lasfer's Curve," Journal of Corporate Real Estate, 9 (2), PP. 72-94.
• Lease, R. C.;, J. J.; McConnell, and J. S. Schallheim (1990), "Realized Returns and the Default Prepayment Experience of Financial Leasing Contracts," Financial Management, PP. 11-20.
• Lewis, C. M.; and J. S. Schallheim (1992), "Are Debt and Leases Substitutes?," Journal of Financial and Quantitative Analysis, PP. 497-511.
• LFG, London Financial Group (1996), "Euromoney Publication: World Leasing Yearbook." U.K., London: London Financial Group.
• Lowe, J. F.; , Morgan;, and Tomkins C. R. (1980), "Lease Finance in Industrial Markets," Management and Decision Economics, 1 (3), PP. 150-56.
• Maddala, G. S. (2001), Introduction to Econometrics (3rd ed.). UK- Sussex: John Wiley & Sons Ltd.
• Malone, D., C. Fries, and T. Jones (1993), "An Empirical Investigation of the Extent of Disclosure in the Oil and Gas Industry," Journal of Accounting, Auditing and Finance, Vol. 8 (No. 3), PP. 249-73.
• Marston, F.; and R. S. Harris (1988), "Substitutability of Leases and Debt in Corporate Capital Structure," Journal of Accounting, Auditing & Finance, PP. 147-69.
• McAdam, M. Bruce (1988), "Equipment Leasing: An Integral Part of Financial Services," Business Economics, 23 (3), PP. 43-47.
• Merhan, Hamed;, R. A.; Taggart, and D. Yermack (1999), "CEO Ownership, Leasing, and Debt Financing," Financial Management, 28, PP. 5-14.
• Ministry of lndustry and Trade (2007): www.mit.gov.jo.
• Ministry of Planning (2007): www.mop.gov.jo.
• Mukherjee, T. K. ( 1991 ), "A Survey of Corporate Leasing Analysis," Financial Management, 20, PP. 96-107.
• Myers, S. C. (1977), "Determination of Corporate Borrowing," Journal of Financial Economics, 5, PP. 147-75.
• Norusis, M. J. (1995), SPSS 6.1 Guide to Data Analysis: Prentice-Hall Englewood Cliffs, NJ.
• Ross, L.; and C. Stephen (2001), "The Leasing Industry's Legal Environment Improves," The China Business Review, January-February, PP. 48-51.
• Schallheim, J. S.;, R. E.; Johnson, R.C.; Lease, and McConnell (1987), "The Determinants of Yields on Financial Leasing Contracts," Journal of Financial Economics, PP. 45-67.
• Sharpe, S. A.; and H. H. Nguyen (1995), "Capital Market Imperfection and the Incentive to
• Lease," Journal of Financial Economics, 39 (PP. 271-94).
• Smith, C. W.; and L. M. Wakeman (1985), "Determinants of Corporate Leasing Policy," Journal of Finance, PP. 895-908.
• Street, D. L. and S. M. Bryant (2000), "Disclosure Level and Compliance with lASs: A Comparison of Companies with and without U.S. Listing and Filings'," The International Journal of Accounting, Vol. 35 (No.3).
• Stulz, R. M.; and H. Johnson (1985), "An Analysis of Secured Debt," Journal of Financial Economics, PP. 501-21.
• Thomas, R. L. (1997), Modem Econometrics: An Introduction (2nd ed.). England- Essex: Wesley Longman Limited.
• Vora, P. P.; and J. R. Ezzell (1991), "Leasing vs. Purchasing: Direct Evidence on a Corporation's Motivations for Leasing and Consequences of Leasing," Pennsylvania State University Working Paper.
• Wallace, R. S. 0. andK. Naser(l995), "Firm-Specific Determinants of the Comprehensiveness of Mandatory Disclosure in the Corporate Annual Reports of Firms Listed on the Stock Exchange of Hong Kong," Journal of Accounting and Public Policy, Vol. 14, PP. 311-68.
• Wallace, R. S. 0., K. Naser, and A. Mora (1994), "The Relationship between the Comprehensiveness of Corporate Annual Reports and Firm Characteristics in Spain," Accounting and Business Research, Vol. 25 (No. 97), PP. 41-53.
• Williamson, 0. E. (1988), "Corporate Finance and Corporate Governance," Journal of Finance, 43, PP. 41-47.
How to Cite
Al-Shiab, Mohammad Salam, and Shamsi Bawnih. 2008. “Determinants of Financial Leasing Development in Jordan”. Studies in Business and Economics 14 (2). https://doi.org/10.29117/sbe.2008.0048.
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