Preprint
The Value of Receivables Pooling
SSRN
2017
Abstract
We investigate what value firms may obtain if they pool their accounts receivable for the purpose of financing investments in cost-reducing assets. Our study is motivated by 'reverse factoring' arrangements, which simultaneously relax some capital market frictions but impose others. Specifically, reverse factoring allows firms to reduce their financing costs by selling receivables, but the transactions are indivisible: the full receivable must be sold. We show how receivables pooling mitigates the adverse impact of this indivisibility. In a make-to-order setting where firms may also pool their investments (invest jointly), we explore the following questions. (1) Is return on investment (ROI) from receivables pooling enhanced when firms also pool investment? (2) Are the profit increases from each type of pooling super-additive or sub-additive? By means of numerical experimentation, we find that for firms with low (high) relative technology maturity, the ROI enhancement from receivables pooling is greater when firms invest jointly (independently). The additional profit from investing jointly and pooling receivables is positive (negative) when the firm's technology maturity level is low (high). Our results indicate that simultaneous evaluation of operational and financial pooling concepts is warranted
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Details
- Title
- The Value of Receivables Pooling
- Creators
- Kasper van der VlietMatthew ReindorpJan C Fransoo
- Publisher
- SSRN
- Number of pages
- 1 Online-Ressource (42 p)
- Resource Type
- Preprint
- Language
- English
- Academic Unit
- Decision Sciences (and Management Information Systems)
- Identifiers
- 991021810269504721