Vol 21 , Issue 1 , January - June 2020 | Pages: 73-83 | Research Paper
Published Online: January 06, 2020
Author Details
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Purpose: Factoring is a method of financing and credit management against the bill receivables of the client firms. This financing service may be affected by many socio-economic variables. Thus, the current research paper assesses the impact of macro socio-economic variables on factoring services across the countries.
Design/Methodology/Approach: Secondary data published by international agencies i.e., Factors Chain International (FCI) and World Bank have been used for the present study. 49 countries have been taken into consideration, which include 30 developed countries and 19 developing countries. These countries have factoring data consistently year after year from 1998 to 2016. The required factoring data and socio-economic variables data have been used to construct the panel dataset. Data have been analyzed by using Ordinary Least Squares (OLS) method and The Fixed Effects Model to estimate the determinants of factoring across the countries.
Findings: The finding revealed that macro socio-economic variables affect the factoring service across the countries. Globally, the most important macro socio-economic variables of factoring services are trade openness, exchange rate, and services. The elasticity of each variable is more than unitary (one). Other important socio-economic variables are lending interest rate, financial services, credit to domestic private sector, gross domestic saving, and GDP per capita. In case of case of developed countries, socio-economic variables such as ICT, bank non performing loan, inflation, and market capital affect the factoring services.
Research Limitations: Data have not been consistently available for all countries. So, in the present study only 49 countries have been considered on the basis of availability of the data for a period from 1998 to 2016.
Practical Implications: The results suggest that there should be a sustainable and long long-term conducive credit and financing environment and policies related to account receivables which facilitate long-term development of factoring.
Originality/Value: This study is a cross country analysis of factoring. There are few studies which cover impact of socio-economic variables on factoring service.
Keywords
Factor, International Trade, Receivables, Financial Intermediary, Macro-economic Variables.