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Leasing as a Mitigation Channel of Capital Misallocation
2025-05-09
Time: 10:00 am - 11:30 am, May 9th, 2025
Speaker: Kai Li (Peking University)
Venue: 1F, Wanzhong Building, Langrun Garden, Peking University
Abstract:
We argue that leasing is an important mechanism for mitigating credit constraint-induced capital misallocation, yet this channel has been widely overlooked in the current macro-finance literature. We demonstrate and quantify this novel channel through a dynamic general equilibrium model, which features heterogeneous firms, collateral constraints, and an explicit buy versus lease decision. Furthermore, our model provides guidance on the empirical measurement of capital misallocation: ignoring leased capital and its mitigation effect can result in significant overestimations of measured capital misallocation and its cyclicality. We use firm-level data to document strong empirical evidence consistent with our model.
Speaker:
Kai Li is a Professor of Finance at Peking University HSBC Business School (PHBS). His primary research fields include asset pricing, macro finance, green finance, financial economics, and China's financial market. He focuses on developing, testing, and applying equilibrium asset pricing theory, with a special emphasis on the financial accelerator mechanism. His papers have been published in leading academic journals, such as the Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Journal of Monetary Economics, and Review of Finance. His research on green finance is recognized as the top-cited article in the Journal of Finance and has received the WFA Best Empirical Finance Paper Award and the Amundi-ESSEC ESG Prize. Additionally, he currently serves as the Associate Editor of several academic journals, including China Economic Quarterly and Economics Letters.