The Leasing Decisions of Small, Privately Held Firms

Abstract

We analyze the impact of firm’s asset uniqueness and its growth opportunities on the leasing decisions of U.S. startups. To test our hypotheses, we use a unique dataset provided by the Kauffman Foundation. Our results show that startups in the high-technology sector have a lower propensity to lease whereas startups with high R&D intensity have a higher propensity to lease. In addition, we examine the impact of owners’ characteristics on the decisions to lease and find that female and older entrepreneurs as well as highly educated owners are less likely to lease. Our findings confirm previous studies on leasing decisions that larger and more leveraged businesses have a higher propensity to lease their assets. Consistent with Ang and Peterson (1984) and Bathala and Mukerjee (1995) we report that leasing and debt are complements rather than substitutes to each other.