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Comparative Analysis of Leasing's Evaluation as a Method of Financing Investments in Greek Agribusiness Sector Before and During Greek Economic Crisis

Received: 27 October 2016     Accepted: 30 December 2016     Published: 20 January 2017
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Abstract

Financing for acquiring assets in Greek agribusiness sector is very common and supports Greek agribusiness sme’s production. Purpose of this study is the comparative analysis of leasing's evaluation as a method of financing in order to acquire assets used directly in the production process of a business of secondary Greek agribusiness sector or even vertically integrated business. Thus, research was held in April of 2006 and December of 2012, collecting proper data from Greek banking sector and considering Tax Legislation. Decision for the selection of the financial practices in the event of such an investment should be made after taking into consideration several factors. Proper financial evaluation of future investment is necessary, while it’s too necessary to be compared the financing choices that are given in Greece. Considering Tax Legislation, Banking Practices, and Law on Leasing, financing methods were compared in two different reference periods, before and during Greek economic crisis. Avoiding generalizations, typical examples are given, showing that leasing preceded against borrowing, considering conditions prevailing in Greece at these two reference periods. But decision making for selection of financing method is affected by factors, which may lead to either correct or incorrect conclusions for firm’s interests, if evaluation is not correct or there are personal interests of decision-makers in the administration. Consequently, incentives to use leasing for financing a business can be a lot, but quite important are ownership structure, nature of investment opportunities, business risk and tax status.

Published in Journal of Business and Economic Development (Volume 2, Issue 2)
DOI 10.11648/j.jbed.20170202.12
Page(s) 79-86
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Financing, Leasing, Borrowing, Agribusiness, Investments, Smes, Economy, Crisis

References
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[2] Smith, C. W.; Wakeman, L. M. Determinants of Corporate Leasing Policy. J. Finance 1985, 7, 896–908.
[3] Flath, D. The Economics of Short-Term Leasing. Economic Inquiry 1980, 4, 247–259.
[4] Barclay, M. J.; Smith, C. W. Jr. The Priority Structure of Corporate Liabilities. J. Finance1995, 7, 899–917.
[5] Williamson, O. E. Corporate Finance and Corporate Governance. J. Finance1988, 7, 567–591.
[6] Bower, R. S. Issues in Lease Financing, Financial Management1973, 1, 25-34.
[7] Brealey, R.; Young, C. Debt, Taxes and Leasing: A Note. J. Finance 1980, 12, 1245–1250.
[8] Brick, I. E.; Fung, W.; Subrahmanyam, M. Leasing and Financial Intermediation: Comparative Tax Advantages. Financial Management1987, 2, 55–59.
[9] Lewellen, W. G.; Long, M. S.; McConnell, J. J. Asset Leasing and Competitive Capital Markets. J. Finance1976, 6, 787–798.
[10] Miller, M. H.; Upton, C. W. Leasing, Buying and Cost of Capital Services. J. Finance1976, 6, 761–786.
[11] Myers, S. C.; Dill, D. A.; Bautista, A. J. Valuation of Financial Lease Contracts. J. Finance1976, 6, 799–820.
[12] Finucane, T. J. Some Empirical Evidence on the Use of Financial Leases. J. Financial Research1988, 4, 321–333.
[13] Graham, J. R.; Leary, M. T. A Review of Empirical Capital Structure Research and Directions for the Future. Annual Review of Financial Economics2011, 3, 309-345.
[14] Vora, P. P.; Ezzell, J. R. Leasing vs. Purchasing: Direct Evidence on a Corporation’s Motivations for Leasing and Consequences of Leasing. Pennsylvania State University, Working Paper, Vol. 3., 1991.
[15] Marston, F.; Harris, R. S. Substitutability of Leases and Debt in Corporate Capital Structures. J. Accounting, Auditing & Finance1988, 2, 147–169.
[16] Deloof, M.; Verschueren, I. Are Leases and Debt Substitutes? Evidence from Belgian Firms. Financial Management1999, 3, 91–95.
[17] Gavazza, A. Asset liquidity and financial contracts: Evidence from aircraft leases. J. Fin. Econ. 2010, 95, 62-84.
[18] Rampini, A.; Viswanathan, S. Collateral, risk management, and the distribution of debt capacity. J. Finance 2010, 65, 2293-2322.
[19] Eisfeldt, A.; Rampini, A. Leasing, Ability to Repossess, and Debt Capacity. Rev. Financ. Stud. 2009, 22, 1621-1657.
[20] Rampini, A.; Viswanathan, V. Collateral and Capital Structure, Work. Pap., Duke Univ., 2010.
[21] Mehran, H.; Taggart, R. A.; Yermack, D. CEO Ownership, Leasing and Debt Financing. Financial Management1999, 3, 5–14.
Cite This Article
  • APA Style

    Apostolos D. Zaridis. (2017). Comparative Analysis of Leasing's Evaluation as a Method of Financing Investments in Greek Agribusiness Sector Before and During Greek Economic Crisis. Journal of Business and Economic Development, 2(2), 79-86. https://doi.org/10.11648/j.jbed.20170202.12

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    ACS Style

    Apostolos D. Zaridis. Comparative Analysis of Leasing's Evaluation as a Method of Financing Investments in Greek Agribusiness Sector Before and During Greek Economic Crisis. J. Bus. Econ. Dev. 2017, 2(2), 79-86. doi: 10.11648/j.jbed.20170202.12

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    AMA Style

    Apostolos D. Zaridis. Comparative Analysis of Leasing's Evaluation as a Method of Financing Investments in Greek Agribusiness Sector Before and During Greek Economic Crisis. J Bus Econ Dev. 2017;2(2):79-86. doi: 10.11648/j.jbed.20170202.12

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  • @article{10.11648/j.jbed.20170202.12,
      author = {Apostolos D. Zaridis},
      title = {Comparative Analysis of Leasing's Evaluation as a Method of Financing Investments in Greek Agribusiness Sector Before and During Greek Economic Crisis},
      journal = {Journal of Business and Economic Development},
      volume = {2},
      number = {2},
      pages = {79-86},
      doi = {10.11648/j.jbed.20170202.12},
      url = {https://doi.org/10.11648/j.jbed.20170202.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jbed.20170202.12},
      abstract = {Financing for acquiring assets in Greek agribusiness sector is very common and supports Greek agribusiness sme’s production. Purpose of this study is the comparative analysis of leasing's evaluation as a method of financing in order to acquire assets used directly in the production process of a business of secondary Greek agribusiness sector or even vertically integrated business. Thus, research was held in April of 2006 and December of 2012, collecting proper data from Greek banking sector and considering Tax Legislation. Decision for the selection of the financial practices in the event of such an investment should be made after taking into consideration several factors. Proper financial evaluation of future investment is necessary, while it’s too necessary to be compared the financing choices that are given in Greece. Considering Tax Legislation, Banking Practices, and Law on Leasing, financing methods were compared in two different reference periods, before and during Greek economic crisis. Avoiding generalizations, typical examples are given, showing that leasing preceded against borrowing, considering conditions prevailing in Greece at these two reference periods. But decision making for selection of financing method is affected by factors, which may lead to either correct or incorrect conclusions for firm’s interests, if evaluation is not correct or there are personal interests of decision-makers in the administration. Consequently, incentives to use leasing for financing a business can be a lot, but quite important are ownership structure, nature of investment opportunities, business risk and tax status.},
     year = {2017}
    }
    

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    AB  - Financing for acquiring assets in Greek agribusiness sector is very common and supports Greek agribusiness sme’s production. Purpose of this study is the comparative analysis of leasing's evaluation as a method of financing in order to acquire assets used directly in the production process of a business of secondary Greek agribusiness sector or even vertically integrated business. Thus, research was held in April of 2006 and December of 2012, collecting proper data from Greek banking sector and considering Tax Legislation. Decision for the selection of the financial practices in the event of such an investment should be made after taking into consideration several factors. Proper financial evaluation of future investment is necessary, while it’s too necessary to be compared the financing choices that are given in Greece. Considering Tax Legislation, Banking Practices, and Law on Leasing, financing methods were compared in two different reference periods, before and during Greek economic crisis. Avoiding generalizations, typical examples are given, showing that leasing preceded against borrowing, considering conditions prevailing in Greece at these two reference periods. But decision making for selection of financing method is affected by factors, which may lead to either correct or incorrect conclusions for firm’s interests, if evaluation is not correct or there are personal interests of decision-makers in the administration. Consequently, incentives to use leasing for financing a business can be a lot, but quite important are ownership structure, nature of investment opportunities, business risk and tax status.
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Author Information
  • Business Administration, Hellenic Open University, Patras, Greece

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