Loss given default in SME leasing

Abstract Leasing provides a fundamental source of firm funding, especially for small and medium-sized enterprises. A crucial difference from loans bonds is that the lessor retains ownership rights leased asset during lease term. This facilitates utilization work-out process leads to higher liquidation proceeds. Hence, previous findings on loan bond loss given default (LGD) are not transferable leasing industry. Our analysis based very granular data set covering great variety information lessee, asset, as well contractual transactional characteristics. We examine novel LGD determinants such an external credit rating, lessee’s limited liability, number assets collaterals. Moreover, new results previously explored factors question earlier findings, example, contract type. Most importantly, proposed by Miller Töws (J Bank Finance 91:189–201, 2018), we analyze two different LGDs, one proceeds, other repayments. clearly indicate importance this separation when analyzing drivers in detail because several affect these LGDs ways. study assists both lessors regulators assessing effective risk contracts enables enhance their management processes.