The Effect of Capitalizing Operating Leases on Company Propensity to Lease: A quantitative study on the effects of IFRS 16 on Swedish firms

University essay from Handelshögskolan i Stockholm/Institutionen för redovisning och finansiering

Abstract: This study investigates whether firm propensity to lease has decreased after the implementation of IFRS 16. To answer this question, we use three cross-sectional regression models on data gathered from 90 Swedish firms in two-year intervals during 2015-2021. The firms were all listed on OMX Stockholm with their headquarters located in Sweden. Not in line with previous literature, our results cannot establish a link between higher degrees of to-be capitalized operating leases and a greater decrease in leasing after IFRS 16 implementation. Our lack of significant results could be due to differences between IFRS 16 and comparable regulation implementations which literature has previously analysed. There is however an indication of firms with higher degrees of operating leases pre-implementation, shifting to shorter leases that continue to be kept off-balance. Our study contributes by filling an established need for standard setters to evaluate the effects of IFRS 16, as well as helping practitioners who wish to understand more about the effects of the new leasing standard.

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