Lessors' recovery risk management capability

Purpose – The purpose of this paper is to verify recovery risk management capabilities by lessors. It tests several hypotheses and finds out interesting specific results for lessors. Design/methodology/approach – The approach is empirical: two different database of leasing contracts are analysed with econometric methodologies. Findings – There is clear evidence that: lessors are ex ante able to balance the probability of default and the loss given default case by case, using proper contract structures; and they carefully manage recovery procedures and strategies according to operations' characteristics. Research limitations/implications – The data used are large enough, but come from institutions concentrated in Italy. Future research could be extended to other relevant countries. Practical implications – Results presented are verified in leasing companies which made a limited use of rating systems and credit risk model: they have been achieved by the continuous improvements of traditi...