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Article

Financial dependence and the terms of payments in international transactions

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ABSTRACT

Using a novel data on payment choice in export transactions, this study shows that financing cost in a country is more important in terms of offering (undertaking) post-shipment (prepayment) terms in exports (imports) for the industries that rely more on external finance.

JEL CLASSIFICATION:

Acknowledgement

We thank Tim Schmidt-Eisenlohr and Nurullah Gur for helpful comments and discussions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Manova (Citation2012).

2 Beck (Citation2003).

3 Similar studies include Antràs and Foley (Citation2015) and Demir and Javorcik (Citation2014). Demir and Javorcik (Citation2014) use a highly disaggregated data on payment choice from Turkey.

4 We checked the F-test for the individual effects to conclude that panel estimation and Hausman test to conclude that fixed effects is a better choice.

5 Shares are between 0 and 1.

6 Our results are insensitive to treating only Open Account as post-shipment.

7 The financial dependence measure is time-invariant.

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