The determinants of selling accounts receivable
There are many reasons for companies to sell the accounts receivables, including transferring the default risk of the buyers, collecting the cash by financing procedure, obtaining the professional advice, and reducing the foreign exchange risk; on the other hand, the banks have some advantages to engage in buying accounts receivables business (“factoring business”) as well, which include increasing the liquidity of idle funds, lower the non-performing loan ratio, generating fee incomes, and establishing relationships with potential corporate clients. It demonstrates that both companies and banks are benefited by factoring business. The determinants of selling accounts receivable are investigated in the study. The results of the study are expected to become the reference for business managers to formulate the strategy of financial planning, to manage the resource of accounts receivable properly, and to enhancing the business performance and value; in addition, the results are expected to utilized by banks to determine what kinds of clients are the target customers regarding promoting factoring business. The firms in Taiwan electronic industry are the objects of the study, and the variables are collected from their audited financial reports. The empirical conclusions are derived from the Logistic regression model, and we conclude that firms with larger scales, shorter net operating cycle, and lower ratios of cash and short-term investment to current assets are more possibly to sell their accounts receivable.In addition,” net operating cycle”occurs time lag effect.