Factoring as a Determinant of Capital Structure for Large Firms: Theoretical and Empirical Analysis

Borsa Istanbul Review 2019

9 Pages Posted: 15 Jun 2021

See all articles by Rumeysa Bilgin

Rumeysa Bilgin

Istanbul Sabahattin Zaim University

Yusuf Dinc

Istanbul Sabahattin Zaim University

Date Written: May 20, 2019

Abstract

Firms engage in factoring as an external financing option. Factoring is generally considered as a costly option. However, firms may prefer factoring financing when they reach a certain level of indebtedness that increasing it may negatively affect their firm value. Up to now, far too little attention paid on the role of factoring on the capital structure decisions. This paper is the first attempt to provide a theoretical framework and empirical evidence on the role of factoring as a determinant of capital structure. A Fractional Regression Model is estimated using a sample of 261 publicly listed firms in Turkey for the 2012e2017 period. The empirical evidence presented in this paper implies that factoring does not effect on the initial decision of leveraging, whereas it is a determinant of capital structure for leveraged firms. Another significant finding is the existence of the relationship between increasing factoring and increased leverage.

Keywords: Factoring, Capital structure, Two-part fractional regression model

JEL Classification: G20, G23, G32

Suggested Citation

Bilgin, Rumeysa and Dinc, Yusuf, Factoring as a Determinant of Capital Structure for Large Firms: Theoretical and Empirical Analysis (May 20, 2019). Borsa Istanbul Review 2019, Available at SSRN: https://ssrn.com/abstract=3860668

Rumeysa Bilgin (Contact Author)

Istanbul Sabahattin Zaim University ( email )

Halkali Caddesi
No: 2
Istanbul, Kucukcemece 34303
Turkey

Yusuf Dinc

Istanbul Sabahattin Zaim University ( email )

Halkali Cadessi
Halkali
Isdtanbul, Kucukcemece 34303
Turkey

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
26
Abstract Views
148
PlumX Metrics