Lease Capitalization and Systematic Risk

This study investigates whether the market-determined systematic risk of the companies that used leasing extensively was affected by ASR 147, the FASB's August, 1977, exposure draft on lessee accounting, and SFAS 13. Three samples of companies were used in the study: (1) companies which engaged in a lot of leasing, (2) companies which did very little leasing, and (3) a random sample of companies. The leasing sample and the non-leasing sample were matched by Standard Industrial Classification (SIC) code. There was no significant change in the systematic risk of the sample companies pre- and post-June, 1973. There was no significant change in the systematic risk of the three groups of companies pre- and post-August, 1975. This leads to the conclusion that the SEC's ASR 147 and the FASB's pronouncement had little effect on the market's assessment of systematic risk.