An empirical examination of organizational structure: The economics of the factoring decision

Smith, Janet Kiholm; Schnucker, Christjahn

doi:10.1016/0929-1199(94)90012-4

Cited by 49 publications

(47 citation statements)

References 12 publications

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“…In addition factoring is used by firms to cover potential payment defaults while increasing equity ratios. They also confirm the findings of Smith and Schnucker (1993) that factoring is chosen to reduce the transaction costs. The results show that factoring is more likely if the firm has many different and dislocated customers.…”

Section: Literature Reviewsupporting

confidence: 76%

“…Their analysis shows that transaction costs are important determinants for the choice between integrating credit management and factoring as well as factoring is more likely to be used when information and monitoring costs are high. Furthermore, they point out that factoring is more likely and beneficial for sellers with geographically dislocated buyers and few repeat sales to any given buyer as well as for buyers with incomplete information about the seller (Smith & Schnucker, 1993). Summers and Wilson (2000) considered the factoring market in the UK in 1994 and examined the preferences of factors and the function of the demand for short-term financing as determinants for the use of factoring.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Smith and Schnucker (1993) regard the factoring decision as a choice about organizational structure on the basis of transaction costs theory of organization. They follow Coase (1937) and assume the effect of information and monitoring costs (transaction costs) as well as the effect of transaction-specific investments on the choice of organizational structure (vertical integration).…”

Section: Literature Reviewmentioning

confidence: 99%

“…According to Smith and Schnucker (1993), the reputation of the factor is a critical element of the efficient functioning of factoring markets, especially in markets with incomplete information. An excellent reputation of the factor is assumed given a long presence in the factoring market or a recognized own brand name or brand name of the holding company (i.g.…”

Section: The Profitability Of Factors Is Negatively Influenced By Agementioning

confidence: 99%

“…The analysis from Smith and Schnucker (1993) is based on results of a survey of 770 US firms in 1991. Smith and Schnucker (1993) regard the factoring decision as a choice about organizational structure on the basis of transaction costs theory of organization.…”

Section: Literature Reviewmentioning

confidence: 99%

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Effects of Shareholder Groups on the Factoring Institutions Profitability: Evidence from Germany

Koch¹

2015

IJEF

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The significant role of trade credit in financing large companies and small and medium-sized enterprises leads to high stocks of account receivables within the balance sheets of German firms. As a result the importance of working capital financing is growing and the demand for accounts receivables financing (factoring) increases. The German factoring industry is dominated by banks. In addition to bank-owned financial institutions, many non-bank financial institutions are represented on the market. In a context of a continuing market consolidation, it is of interest whether there are differences in terms of profitability depending on shareholder groups (financial institution, non-financial institution, non holding). The German factoring market is an extremely growing market with further growth potential in an ongoing market consolidation. A further market consolidation is probable because the administrative expenses of small financial institutions and institutions without any holding are high. However, subsidiaries of a financial holding or non-financial holding show significantly lower administrative expenses. The results show that the profitability of the financial institutions is significantly influenced by the shareholders and the size of the institution. Financial institutions of a financial holding (bank-owned) are significantly less profitable than institutions without any holding or institutions of a non-financial holding. A similar picture emerges in the achieved margins of factors.

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Section: Literature Reviewsupporting

confidence: 76%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: The Profitability Of Factors Is Negatively Influenced By Agementioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 3 more Smart Citations

Effects of Shareholder Groups on the Factoring Institutions Profitability: Evidence from Germany

Koch¹

2015

IJEF

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Trade credit and customer relationships

Summers

Wilson

2003

Manage Decis Econ

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Trade credit is an important economic phenomenon, and a variety of theories have been put forward to explain the decisions firms make on credit extension. The ways in which credit can be used as a strategic tool to support corporate objectives has not, however, been fully discussed. The results presented here provide some support for the extant theory on trade credit extension and for recent empirical papers in this area (e.g. Ng et al., 1999; Petersen and Rajan, 1994). However, our results suggest that trade credit granting has a set of subtle and complex motivations over and above those predicted by standard theory. In particular trade credit extension can be used as a many-faceted marketing|relationship management tool and|or as a means of signalling information to the market or to specific buyers about the firm, its products and its future prospects|commitment. Much of credit extension can be seen as customer focused; for example, encouraging frequent purchasers which offer the potential for relationship development or accommodating customers' demand for credit to help finance their production period. The requirements|bargaining power of large customers can influence a firm to extend more credit. Firms will vary terms in anticipation of capturing new business, to attract specific customers and in order to achieve specific marketing aims. Copyright © 2003 John Wiley & Sons, Ltd.

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The decision to finance account receivables: the factoring option

Soufani

2001

Manage Decis Econ

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Factoring is a financial service enabling enterprises to sell their accounts receivable to a factoring company in exchange for cash. The market for factoring in the UK has been growing at substantial rates and most banking institutions are now actively involved in providing this service. Little research on the factoring market currently exists and so this paper'seeks to profile the determinants influencing decision making in the UK factoring industry. Using data from an interview-based survey, this paper establishes that the decision to purchase an enterprise's accounts receivable is influenced by the enterprise's size, type of product or service it offers, industry, sector, age, type of customers, financial statement, the management team, operational suitability, collectability and credit notes. Copyright © 2002 John Wiley & Sons, Ltd

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An empirical examination of organizational structure: The economics of the factoring decision

Cited by 49 publications

References 12 publications

Effects of Shareholder Groups on the Factoring Institutions Profitability: Evidence from Germany

Effects of Shareholder Groups on the Factoring Institutions Profitability: Evidence from Germany

Trade credit and customer relationships

The decision to finance account receivables: the factoring option

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