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The purpose of this paper is to investigate if a green lease could eliminate the split incentive problem in two office buildings located in Stockholm, Sweden. It aims to provide a theoretical overview concerning the “energy paradox” and to describe a case study in which a green lease was to be implemented in the legal framework for two office buildings in the Stockholm region.

This paper documents a case study, in which a green lease was to be implemented in the legal framework for two office buildings, to promote a more active engagement in the buildings energy performance. In order to accomplish this, a project group was formed which consisted of representatives from the building owners, tenant, property manager, energy consultants and KTH, Royal Institute of Technology, Stockholm.

This paper reveals that it is very hard to alter already legally binding agreements. Furthermore, it shows that the separation of ownership and usage of a building may not be optimal from an energy efficiency point of view.

The paper gives an empirical explanation as to why at times energy efficiency measures are not undertaken, even though the investments themselves bring about a positive net present value. In addition, the paper analyses the situation where property maintenance is outsourced to a property management firm, which is a common but seldom discussed situation in the literature.

Following six years consideration of the problem, and the production of at least two widely circulated early versions of the proposed exposure draft, the ASC formally published ED 29 in October 1981. ED 29 deals with accounting for leases, but excludes contentious lease contracts concerning rights to explore for or to exploit natural resources and similarly it does not cover licencing agreements for films, patents, copyrights etc. The exposure draft requires capitalisation of finance lease contracts in the accounts of lessees, is broadly consistent with the American, Canadian and International standards and compatible with, but more restrictive than, the Australian exposure draft (which permits, but does not require, capitalisation). In spite of the gestation period, the prior consultation with interested parties and the restricted coverage of the ED, its proposals are controversial and have provoked reaction from both lessors and lessees in the UK. Lease accounting, clearly, is not a simple matter. Indeed leasing arrangements raise many questions which encompass fundamental conceptual issues in accounting and finance. Any resolution of these issues, such as ED 29, in turn gives rise to problems of application.

A green lease incorporates sustainability practices to reduce a building’s negative impact on the environment. Facilities managers play an important role in ensuring these best practices are implemented during the operational stage of a building; however, green leasing is an under-researched area in the emerging field of sustainable facilities management (SFM). This paper aims to investigate the common barriers encountered in ensuring environmental performance when a green lease agreement is in operation between a landlord and tenant.

This research was conducted in three stages using the principal-agent problem as the theoretical foundation for data collection. Stages 1 and 2 used semi-structured interviews to collect data with policy/corporate-level professionals, landlord and facilities management representatives who have considerable experience in green leases. Stage 3 used document reviews based on summative content analysis to further evaluate the extent of the contextual use of green leasing concepts as used within the facilities management community.

The study confirmed a strong incentive gap and information asymmetry between the landlord and facilities manager, forming a typical double principal-agent problem when the split incentives between the landlord and tenants are also taken into consideration, which results in agents acting on their own self-interest rather than the interests of the principal. Goal alignment is found to be key for the successful operation and management of a building throughout its life; when present, these goal conflicts can lead to disharmony between the parties to the contract.

The study proposes a few practical measures to close the gaps in incentive and information asymmetry that create the principal-agent problem, while providing recommendations to the facilities management professional community. These recommendations could be included in future revisions of the SFM guidelines or code of practices used by the industry. Although this study exposed a rather neglected area of the facilities manager’s role in green leases, the findings are limited by the relatively small sample size used for the interviews.

This study contributes to the SFM body of knowledge from a green lease perspective, and the theoretical framework in the double principal-agent problem introduced in the study could be used in future research endeavours.

This paper models the lessee's default options and estimates the economic value of the options for a lessee using a discrete time binomial American option pricing model. Results show a positive relationship of the option premium with the original rent and a negative relationship with the relocation costs. Finds that the default probability is higher for lessees who are more sensitive to rental changes and place less emphasis on the fitting‐out quality. Suggests that rental volatility and rental growth rate are two significant factors that have positive relationships with the default option values. The risk‐free rate, on the other hand, has an inverse relationship with the default option values because a higher risk‐free interest rate reduces the present value of rental savings. Lease term length to expiration has a positive effect on the default option value, implying that the default option premium will decay as the term to expiry is shortened.

Sees the objective of teaching financial management to be to help managers and potential managers to make sensible investment and financing decisions. Acknowledges that financial theory teaches that investment and financing decisions should be based on cash flow and risk. Provides information on payback period; return on capital employed, earnings per share effect, working capital, profit planning, standard costing, financial statement planning and ratio analysis. Seeks to combine the practical rules of thumb of the traditionalists with the ideas of the financial theorists to form a balanced approach to practical financial management for MBA students, financial managers and undergraduates.

In December 1988, the Los Angeles County Public Library entered into an agreement with the Security Pacific Merchant Bank of Los Angeles for the five‐year lease/purchase of a $5.3 million Automated Circulation System (ACS) from Data Research Associates (DRA) of St. Louis. The previous June, the Public Library had entered into a cash contract with DRA, but shifted its position after determining that it was to the County's advantage to lease/purchase the system rather than using available cash fund balances needed for other budgetary priorities. The June 1988 contract with DRA included a clause allowing the assignment of ownership for financing purposes. After negotiating the best possible agreement to purchase the computer system, the County, on behalf of the library, leased/purchased the system from the bank which in turn issued Certificates of Participation to raise the cash from persons and corporations who wanted to purchase relatively short term income tax free investments.

This paper is concerned with accounting for leasehold property. While property professionals are familiar with commercial and technical aspects of leases, recent proposals offer serious implications beyond the notional historical reporting of an entity’s financial position. Current proposals issued by the ASB will markedly impact upon the financial position reported by businesses holding leasehold properties, with consequent effects upon their reported profitability and their ability to raise finance. This paper examines the current position, whereby leases are regarded as either a finance or an operating lease. It then examines the conceptual framework in which accountants view the existing lease reporting provisions, examining the unease the current provisions cause. Finally, it discusses the most recent proposals and offers a commentary upon responses to them. It concludes with a warning to the owners and users of leasehold property to be ready for change ‐ or to make their voices known.

The purpose of this paper is to examine the relationship between a firm's propensity to lease and several firm characteristics: tax position, financial constraint, ownership structure, growth, and size.

Controlling for industry, total lease share, operating and capital lease share ratios, obtained using an income statement approach, are regressed on a trichotomous tax variable, a dichotomous cash flow coverage ratio variable, debt over fixed assets, ownership concentration, market to book value of shares and the natural log of sales.

Total lease share increases with leverage, tax position and growth; it decreases with cash flow coverage, ownership concentration and firm size. Results for operating lease share are similar to those for total lease share. In contrast, capital lease share decreases with tax position and increases with ownership concentration and size.

The results suggest that leasing offers added debt capacity and increases in financially constrained firms. Firms that pay high taxes seem to place more value on the constant stream of tax deductions from the rental payments than on deductions from decreasing interest costs and amortization. Finally, highly concentrated Canadian firms may use less leasing because they are more family‐controlled.

The literature offers mixed reasons for firms' decisions to lease or purchase assets. This study provides further evidence in a rich setting. In 2001, the Canadian tax authorities changed the tax treatment of leases, thus providing an opportunity to validate prior results on the impact of taxes on leasing. By including two different measures of financial constraint, this study disentangles the substitution and the added debt capacity hypotheses.

Purpose – This article examines the operating lease cost stickiness characteristics exhibited by retail firms.

Methodology/approach – Anderson, Banker, and Janakiraman (2003) laid important groundwork for the study of asymmetric cost behavior or cost stickiness. The authors found that a firm’s selling, general, and administrative costs (SG&A) costs increase more with a sales increase than those expenses decrease with an equivalent sales decline. Their findings provided avenues for many studies with differing focal variables; however, extant research has not explored the degree of cost stickiness associated with operating lease expenses. Recognizing the nature and magnitude of operating leases and the competitive and changing environment for retailers, this study adapts Anderson et al.’s (2003) model to provide insights into operating lease stickiness. The study uses archival financial data from 1997 through 2016 for specialty retail firms in testing the lease cost stickiness hypotheses.

Findings – The results of this study supported the hypotheses that operating lease expenses exhibit stickiness behavior and are relatively stickier than future lease commitments for retail firms.

Originality/value – By focusing on retail firms and related lease expenses, this study provides insights into the increasingly competitive retailer environment. This article’s findings will enhance understanding of how specialty retail firms’ managers react to reduced revenues. Finally, given recent authoritative pronouncements affecting accounting for leases and the significance of leasing transactions, research providing insights into cost behavior and managerial actions stands to make an important contribution to literature and practice.