when there is a difference between applicable tax rates of the lessor and lessee, namely

the lessor is in a higher tax bracket, while the lessee is in a lower tax bracket. Studies on

the effect of sale-leaseback announcements on the lessee's and lessor's share prices

record a positive effect on the lessee's share price (see Slovin, Sushka and Poloncheck

(1990), Allen, Rutherford and Springer (1993), Ezzell and Vora (2001) and Fisher

(2004)). Slovin, Sushka and Poloncheck (1990) conclude that the observed positive

market reaction to announcements of a sale-leaseback is due to the perception of

reduction of present value of expected taxes and present evidence that gains from sale-

leasebacks accrue only for the lessees. In similar spirit, Lewis and Schallheim (1992)

assume that leasing offers the opportunity for transferring non-debt tax shields and posit

that if the lessee firm can locate a lessor firm who is more able to enjoy such tax shields

then "the buyer will pay more than they are worth to the lessee" (p.498, Ibid.). According

to the authors, this higher price takes the form of reduced lease payments.

 In this study, sale-leasebacks are viewed as another example of atypical motivation.

Under the Tax Capitalization Hypothesis and consistent with the expectations by Lewis

and Schallheim (1992), I hypothesize that any expected tax benefits by the lessor may be

capitalized into a higher purchase price. Therefore, everything else equal, properties that

are part of sale-leaseback transactions will have higher sales price.