Factoring Financing as a Determinant of Capital Structure

Purpose: While debt and equity have long been the dominant sources of corporate financing, factoring financing has recently emerged as an important alternative. This study aims to clarify the role of factoring financing as a determinant of capital structure decisions, highlighting its relevance in both developed and developing economies.Design/Methodology/Approach: A systematic literature review was conducted using set inclusion and exclusion criteria. Relevant papers exploring the relationship between factoring financing and capital structure were sourced from recognized academic databases including Elsevier, Web of Science, Google Scholar, Academia, and Taylor Francis. A total of 21 studies were screened and critically appraised using the Mixed Methods Appraisal Tool (MMAT) developed by Hong et al. (2018).Findings: The review indicates that factoring is recognized as a key component in capital structure decisions. However, its adoption remains limited in developing countries, primarily due to high costs and a lack of awareness. Most studies focus on developed markets, suggesting a significant research gap in the context of emerging economies.Implications/Originality/Value: This study highlights the need for more empirical research on factoring financing in developing countries. While it has the potential to be a major financing alternative alongside debt and equity, its acceptance and utilization in these economies remain minimal. Policymakers and financial institutions must address cost barriers and promote awareness to facilitate wider adoption.