The joint effects of lead time, information sharing, and the accounts receivable period on reverse factoring
| DOI | https://doi.org/10.1108/IMDS-04-2019-0228 |
| Date | 02 December 2019 |
| Published date | 02 December 2019 |
| Pages | 215-230 |
| Author | Qiuping Huang,Xiande Zhao,Min Zhang,KwanHo Yeung,Lijun Ma,Jeff Hoi-yan Yeung |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
The joint effects of lead time,
information sharing, and the
accounts receivable period on
reverse factoring
Qiuping Huang
College of Management, Shenzhen University, Shenzhen, China
Xiande Zhao
China Europe International Business School,
South China University of Technology, Guangzhou, China and
China Europe International Business School, Shanghai, China
Min Zhang
Queen’s Management School, Queen’s University Belfast, Belfast, UK
KwanHo Yeung
School of Business Administration,
South China University of Technology, Guangzhou, China
Lijun Ma
College of Management and Institute of Big Data,
Intelligent Management and Decision, Shenzhen University, Shenzhen, China, and
Jeff Hoi-yan Yeung
CUHK Business School, Chinese University of Hong Kong, Shatin, Hong Kong
Abstract
Purpose –The purpose of this paper is to empirically investigate the joint effects of lead time, information
sharing and the accounts receivable period on reverse factoring (RF) adoption from the suppliers’perspective.
Design/methodology/approach –Supported by one of the largest commercial banks in China, survey data
are collected from 424 Chinese manufacturing firms and analyzed using regression methods.
Findings –The results suggest that lead time positively affects suppliers’RF adoption directly and
indirectly through the accounts receivable period. Meanwhile, information sharing has a positive, direct and a
negative, indirect influence on suppliers’RF adoption.
Originality/value –The findings give suppliers and financial institutions a better understanding of how to
leverage the benefits of RF.
Keywords Reverse factoring, Information sharing, Lead time, Accounts receivable period,
Supply chain financing
Paper type Research paper
Introduction
Suppliers who have limited financial assets and are beholden to lengthy payment terms
increasingly make use of various supply chain financing tools to mitigate the financial
burden, optimize financial flows and uncap profit growth potential. Reverse factoring (RF)
is a widely acknowledged supply chain financing solution for improving working capital
Industrial Management & Data
Systems
Vol. 120 No. 1, 2020
pp. 215-230
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-04-2019-0228
Received 11 April 2019
Revised 10 July 2019
14 October 2019
Accepted 3 November 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
This research is supported by the National Natural Science Foundation of China with Grant Nos 71471118,
71871145, 71090403/71090400, 71420107024 and 16BGL190. It is also supported by the Institute of Supply
Chain Integration and Service Innovation at South China University of Technology.
215
The accounts
receivable
period on RF
management (Zhang et al., 2019). RF offers suppliers access to short-term credit at a low cost
through the selling of the suppliers’accounts receivable to financial institutions at
a reasonable discount in exchange for cash (Liebl et al., 2016; Caniato et al., 2019).
By improving their working capital management through accounts receivable reduction,
many suppliers can improve their profitability (Pezza, 2011; Liebl et al., 2016). This unique
financial tool is likely to be increasingly considered by suppliers who either face financial
pressure or require a faster cash conversion cycle (Liebl et al., 2016).
RF is not only a practical supply chain financing solution for suppliers but also an
important research topic in the supply chain finance literature (Liebl et al., 2016; Bals, 2019).
The growing acceptance of this solution has not yet been accompanied by a smart
consensus on how suppliers make RF adoption decisions, or the antecedents of RF adoption.
Few empirical studies investigate the factors impacting RF adoption from the supplier’s
perspective (Liebl et al., 2016). To further inform suppliers about this issue, we conducted a
literature review and found that lead time, information sharing and the accounts receivable
period are critical factors influencing suppliers’RF adoption. As such, this study provides
insights into the joint effects of lead time, information sharing and the accounts receivable
period on suppliers’RF adoption.
Our findings can enhance understanding of how supply chain management practices are
associated with manufacturers’RF adoption. Based on our proposed model and guidelines,
which have not been fully investigated in the literature, suppliers can obtain new financial
value by taking advantage of lead time reduction and information sharing initiatives. In
addition, our study can help financial institutions to better understand the conditions
required for approving RF applications, so as to develop competitive RF services.
Literature review
RF is the widely acknowledged practice of supply chain finance in which suppliers can
sufficiently sell or pledge their accounts receivable at a low interest cost with the
collaborative support of their buying clients (Grüter and Wuttke, 2017; Zhang et al., 2019).
To systematically research the factors impacting this supply chain financing practice, we
conduct a review of extant literature and identify the feasible dimensions and impact factors
of supply chain financing adoption. As our literature review indicates the lack of research
systematically examining impact factors specifically for RF adoption, we further fine-tune
the above pertinent impact factors according to the unique characteristics of RF.
Specifically, based on the review of extant literature, we summarize a wide range of
impact factors of supply chain financing adoption into several dimensions. We leverage the
thorough literature reviews of Marak and Pillai (2018) and Bals (2019) and the case study of
Martin and Hofmann (2019) with appropriate modifications. Marak and Pillai (2018)
identified five types of factors (financial, operational, technological, informational and
relational factors) that affect supply chain financing adoption. Through a thorough
literature review, Bals (2019) illustrated that scholars can develop a deeper understanding of
supply chain financing adoption based on eight dimensions of the supply chain financing
framework (financial, supply chain collaboration, technology, stakeholder perspective and
so on). Based on an exploratory multiple-case study, Martin and Hofmann (2019) reported
that three types of factors (financial, cash flow-related and relational) are highly related to
suppliers’supply chain financing selection. These scholars’findings suggest that several
types of factors, including financial, operational, informational and technological, and
relational factors, can significantly influence the adoption of supply chain financing. Based
on the above proposed dimensions and our review of prior empirical literature, we compile
the following feasible categories of impact factors:
•financial factors: accounts receivable period, availability of external financing;
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