Leasing – Swedish Vs Japanese Retail Firms Project Report

There are many rationales for firms to use leasing as a financing alternative. Today, leasing is a widely used means for asset acquisition and constitutes a considerable part of firms’ total capital investments. In Japan, leasing constitutes around 9 percent of total capital investments. In Sweden, the ratio is somewhat higher. According to many previous studies, retail is the industry segment associated with the highest use of leasing. Within this industry segment, however, leasing is utilized to a considerably higher extent by Japanese firms. This study aims to investigate similarities and dissimilarities in firm characteristics of Swedish and Japanese retail firms and to use those findings to explain why Japanese retail firms use leasing to a much greater extent than Swedish retail firms. Data has been collected from three sources: surveys and interviews with company representatives, surveys and interviews with industry experts, and company-specific financial reports. The findings of this study suggests, that out of many points of differences and similarities between Swedish and Japanese retail firms the most significant ones concern: (1) types of assets leased, (2) firms’ profitability, (3) bankruptcy risk, (4) the roles of convenience and cost-effectiveness, and (5) the importance of ownership. Further, the study identifies three main factors that explain the large difference in use of leasing between Swedish and Japanese retail firms, i.e.: the maturity of Japanese retail firms’ leasing market, the defensive mindset of Swedish retail firms, and the relatively low profitability of Japanese retail firms.

Contents

1. Introduction
1.1 Background
1.1.1 Measuring the Use of Leasing
1.1.2 Leasing in Japan
1.1.3 The Japanese Retail Sector
1.1.4 Leasing in Sweden
1.1.5 The Swedish Retail Sector
1.2 Problem Discussion
1.3 Aim
2. Methodology
2.1 Research Design
2.2 Firm Interviews and Surveys
2.3 Industry Experts
2.4 Financial Data
2.5 Data Analysis
2.6 Validity and Reliability
3. Theoretical Framework
3.1 Incentives to Lease
3.2 Firm Specific Characteristics
3.2.1 Bankruptcy Risk
3.2.2 Debt Rating
3.2.3 Agency Costs
3.2.4 Growth Opportunities
4. Empirical Findings
4.1 Financial Data
4.1.1 Estimating the Bankruptcy Risk
4.1.2 Growth Opportunities
4.1.3 Agency Costs
4.2 Interviews and Surveys
4.2.1 Interviewee – SWE1
4.2.2 Interviewee – SWE2
4.2.3 Interviewee – SWE3
4.2.4 Interviewee – SWE4
4.2.5 Survey – JAP1
4.2.6 Survey – JAP2
4.2.7 Survey – JAP3
4.2.8 Interviewee – JAP4
5. Analysis
5.1 Part One – Analysis of Financial Data
5.1.1 Profitability and Risk
5.1.2 Z-Score
5.1.3 Growth Opportunities
5.1.4 Agency Costs
5.1.5 Other Measures
5.2 Part Two – Analysis of Interviews and Surveys
5.2.1 Leased Assets
5.2.2 Convenient and Cost Effective
5.2.3 Ownership
5.2.4 Flexibility
5.2.5 Other Aspects
5.3 Part Three – Analysis of Variations in Leasing Penetration
5.3.1 Developed Market
5.3.2 Defensiveness
5.3.3 Profitability and Cash Flow Volatility
6. Conclusion
Bibliography
Appendices

Author: Brage, Viktor,Eckerström, Gustaf

Source: Goteborg University

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Leasing – Swedish Vs Japanese Retail Firms Project Report