Bringing leased assets onto the balance sheet

Research output: Contribution to journalArticlepeer-review

42 Scopus citations


Pending changes in lease accounting standards will require firms to recognize obligations that have historically been kept off-balance-sheet (OBS). We examine the implications of this accounting treatment for a host of common risk and performance metrics. Conventional leverage, Z-Score, levered beta, return on capital and other asset utilization measures underestimate risk and overstate performance of firms relying heavily on OBS leasing. The distortion affects relative rankings as well as average levels and has increased over time. Proposed changes in reporting standards aim to mitigate future distortion, but necessitate adjustments for time-series comparisons. Under current reporting standards, investors, analysts, and researchers can estimate leased asset value and adjust accounting-based metrics to better reflect these fixed costs.

Original languageEnglish (US)
Pages (from-to)345-360
Number of pages16
JournalJournal of Corporate Finance
Issue number1
StatePublished - 2013

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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