Equipment Financial Leasing Practices and Costs: Comment

* Ivar Sorensen and Ramon Johnson (S & J) [8] have studied the cost of leasing, relating it to the characteristics of lease contracts written by non-bank lessors in the western U.S. and Canada. They conclude that high lease costs, different contract terms between lessors, and treatment of the investment tax credit suggest the lease market is not competitive. The conclusion is important for academic researchers because it upholds the finding of recent theoretical research [4, 6, 7] that market imperfections motivate leasing. This comment develops further evidence. We draw a cross-section sample of 67 corporate leases written between 1971 and 1973 by a major Boston bank, including data on lessees drawn from the files of a bank lessor, thus eliminating two of the limitations that Sorensen and Johnson are careful to note. Our principal conclusions are several. When regressed against lessor's yields, lease-contract characteristics generally had far lower explanatory power than S & J found,