Author(s)

Jinfeng Xue ¹, Badrul Hisham Kamaruddin ¹

Affiliation(s)

¹ City University, Kuala Lumpur, Malaysia

Corresponding Author

Jinfeng Xue

ABSTRACT

The objective of this research is to analyze whether the new lease accounting standards IFRS16 and China CAS21 affect the enterprises’ cash holding decisions. This article regards the new lease standards as a "quasi-natural experiment" and uses a multiple-time-point difference-in-difference (DID) model for research. The research results show that changes in lease accounting standards will lead to enterprises' decisions to reduce their cash holdings, and non-state-owned enterprises (N-SOEs) and higher leasing levels enterprises will reduce their cash holdings more. At the same time, there are significant differences among enterprises with different sizes and different listed ages.  The reduction of cash holdings by enterprises is significantly related to the new lease standards changing the financial leverage, debt maturity structure and total asset cash recovery ratio of enterprises.

KEYWORDS

New lease accounting standards, cash holdings, multiple-time-point DID

CITE THIS PAPER

Jinfeng Xue, Badrul Hisham Kamaruddin, The effects of new lease accounting standards on enterprises cash holdings: Evidence from China. Accounting and Corporate Management (2024) Vol. 6: 81-90. DOI: http://dx.doi.org/10.23977/acccm.2024.060311.

REFERENCES

[1] Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of financial economics, 52(1), 3-46. 
[2] Bratten, B., Choudhary, P., & Schipper, K. (2013). Evidence that market participants assess recognized and disclosed items similarly when reliability is not an issue. The Accounting Review, 88(4), 1179-1210. 
[3] Rauh, J. D., & Sufi, A. (2012). Explaining corporate capital structure: Product markets, leases, and asset similarity. Review of Finance, 16(1), 115-155. 
[4] Ang, J., & Peterson, P. (1984). The leasing puzzle. The Journal of Finance, 39(4), 1055-1065. 
[5] Zechman, S. (2010). The relation between voluntary disclosure and financial reporting: Evidence from synthetic leases. Journal of Accounting Research, 48(3), 725-765. 
[6] Eisfeldt, A. L., & Rampini, A. (2009). Leasing, ability to repossess, and debt capacity. The Review of Financial Studies, 22(4), 1621-1657. 
[7] Myers, J. H. (1962). Reporting of leases in financial statements; Accounting research study no. 04. 
[8] Białek-Jaworska, A., Dobroszek, J., & Szatkowska, P. (2022). Does the IFRS 16 affect the key ratios of listed companies? Evidence from Poland. International Journal of Management Economics, 58(3), 299-315. 
[9] Coelho, M. L. B., da Silva, R. F., & Fully, R. M. P. (2020). Assessment of the impacts caused by the review of IFRS Leases on the economic and financial results of educational institutions in Brazil: a case study. RAGC, 8(37). 
[10] de Almeida Campanha, R., & dos Santos, O. M. (2020). Impacts of the adoption of IFRS 16 in a Brazilian lessee company. Focus: Accounting Reflection, 39(3), 1-18. 
[11] Giner, B., Merello, P., & Pardo, F. (2019). Assessing the impact of operating lease capitalization with dynamic Monte Carlo simulation. Journal of Business Research, 101, 836-845.  
[12] Górowski, I., Kurek, B., & Szarucki, M. (2022). The impact of a new accounting standard on assets, liabilities and leverage of companies: Evidence from energy industry. Energies, 15(4), 1293. 
[13] Oliveira, A. C. L. B. d., Bonfim, M. P., & Fraga, A. (2019). CPC 06 (R2): an analysis of its application and impact on the lessee's financial statements. Thinking about accounting, 21(74). 
[14] Chung, H. J. (2022). The effects of new accounting standards on firm value: The K-IFRS 1116 lease. International Journal of Financial Studies, 10(3), 68.  
[15] Ferreira, P. P., Landsman, W. R., & Rountree, B. (2022). Capital Structure Effects Associated with the New Lease Accounting Standard. Kenan Institute of Private Enterprise Research Paper (2517124). 
[16] de Oliveira Morais, M. A., da Silva Prado, A. G., Melo, L. G. G., da Silva Filho, R. B., Martins, J. D. M., Mota, R. H. G., de Moura, R. R., & Júnior, A. B. (2023). Impact of CPC 06 (r2) on the share price of companies listed on the Bovespa. Management and Secretarial Journal, 14(3), 4134-4151. 
[17] Christensen, D., Lynch, D., & Partridge, C. (2021). You don't know what you don't know: Improvements in investment efficiency prior to a mandated accounting change. Hawai'i Accounting Research Conference, 16(1), 3-64. 
[18] van Kints, R. R., & Spoor, L. L. (2019). Leases on balance, a level playing field? Advances in accounting, 44, 3-9. 
[19] Kim, J.-A., & Choi, J.-S. (2021). The effect of the revised lease accounting standard on financial statements and credit rating of LCCs. Korean Accounting Journal, 30(30), 341-379. 
[20] Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American economic review, 76(2), 323-329. 
[21] Chaplinsky, S., & Niehaus, G. (1990). The determinants of inside ownership and leverage. Ann Arbor, University of Michigan, Working Paper. 
[22] Fazzari, S., Hubbard, R. G., & Petersen, B. C. (1987). Financing constraints and corporate investment. In: National Bureau of Economic Research Cambridge, Mass., USA.
[23] Subramaniam, V., Tang, T. T., Yue, H., & Zhou, X. (2011). Firm structure and corporate cash holdings. Journal of Corporate Finance, 17(3), 759-773. 
[24] Denis, D. J., & Sibilkov, V. (2010). Financial constraints, investment, and the value of cash holdings. The Review of Financial Studies, 23(1), 247-269. 
[25] Lee, C., & Park, H. (2016). Financial constraints, board governance standards, and corporate cash holdings. Review of Financial Economics, 28, 21-34. 
[26] Guangsheng, W. (2018). A Study on the Factors Influencing Cash Holding of Listed Retail Companies in China. Business Studies, 025(005), 34-40. 
[27] Callahan, C. M., Smith, R. E., & Spencer, A. W. (2013). The valuation and reliability implications of FIN 46 for synthetic lease liabilities. Journal of Accounting Public Policy, 32(4), 271-291. 
[28] Öztürk, M., & Serçemeli, M. (2016). Impact of new standard IFRS 16 Leases on statement of financial position and key ratios a case study on an airline company in Turkey. İşletmeve Ekonomi Araştırmaları Dergisi, 7. 
[29] Tao Zhang, & Chuan Zhang. (2024). Research on the Impact of New Leasing Standards on the Efficiency of Tenant's Right to Use Assets: Based on Evidence from Cross listed Enterprises at Home and Abroad. Financial and Accounting Communications (05), 33-37. doi:10.16144/j.cnki.issn1002-8072.2024.05.004
[30] Chen, C.-W., Correia, M., & Urcan, O. (2023). Accounting for leases and corporate investment. The Accounting Review, 98(3), 109-133. 
[31] Jacobson, L. S., LaLonde, R. J., & Sullivan, D. G. (1993). Earnings losses of displaced workers. The American economic review, 685-709. 
[32] Zhang, S., & Liu, C. (2020). State ownership and the structuring of lease arrangements. Journal of Corporate Finance, 62, 101597.

Sponsors, Associates, and Links

---

• Information Systems and Economics
  
  
• Accounting, Auditing and Finance
  
  
• Industrial Engineering and Innovation Management
  
  
• Tourism Management and Technology Economy
  
  
• Journal of Computational and Financial Econometrics
  
  
• Financial Engineering and Risk Management
  
  
• Social Security and Administration Management
  
  
• Population, Resources & Environmental Economics
  
  
• Statistics & Quantitative Economics
  
  
• Agricultural & Forestry Economics and Management
  
  
• Social Medicine and Health Management
  
  
• Land Resource Management
  
  
• Information, Library and Archival Science
  
  
• Journal of Human Resource Development
  
  
• Manufacturing and Service Operations Management
  
  
• Operational Research and Cybernetics