Subject：Leasing as a Mitigation Channel of Capital Misallocation

Guest：Kai LI, Associate Professor, PHBS

Host：Zhongzhi SONG, Associate Professor, ACEM

Time：10:00-11:30am. Monday, Dec 18, 2023

Venue：Room B207, Antai Building

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.

Guest Bio：

Dr. Kai LI currently serves as an Associate Professor of Finance with a long-term appointment at the Peking University HSBC Business School. He earned his Ph.D. in Economics from Duke University, USA, and holds an undergraduate degree from Shanghai Jiao Tong University and a master's degree from Peking University. His research primarily focuses on asset pricing, macro finance, green and climate finance, financial economics, and the Chinese financial market. His work is dedicated to developing, validating, and applying a new theory of asset pricing based on financing constraints, particularly applied to significant theoretical and empirical issues in the Chinese financial market. Dr. Li’s research has been published in leading international journals in finance and economics, including the Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Journal of Monetary Economics, Review of Finance, Journal of Corporate Finance, Journal of Empirical Finance, Financial Management, and "Comparative Studies" among others. He has led the National Natural Science Foundation of China's Excellent Young Scientists Fund Project (Overseas) and has been consecutively funded for five years by the Hong Kong Young Research Fund and Research Matching Grant. Dr. LI's research on industrial pollution and asset pricing was honored with the Best Paper Award (Amundi-ESSEC ESG Prize 2022) by the American Commodity and Energy Markets Association. He is also currently serving as the Associate Editor for "Economics Quarterly."