Download or read book Two Essays on Trade Credit written by Terence Mallon Kennedy and published by . This book was released on 2005 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Trade Credit written by Fatih Altunok and published by . This book was released on 2012 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Trade Credit and International Trade written by Santiago Justel and published by . This book was released on 2020 with total page 217 pages. Available in PDF, EPUB and Kindle. Book excerpt: When a buyer and a seller meet in the market, both need to decide quantity and price. However, often they also argue when to transfer the payment. In one extreme, the seller may demand early payment before delivering the goods. In the other, the buyer can demand late payment after receiving the products/services. The former is sometimes called cash in advance, while the latter is called trade credit. Understanding the use of trade credit is essential because it is one of the main sources of short-term finance for firms. Additionally, since each trade contract specifies prices, quantities, and payment delay, the contract is implicitly defining who is responsible for financing the production and who bears the risk of default, which can itself be a deterrent to trade. My dissertation aims to study some of the novel factors that shape the use of trade credit and shed some light on its effects on a firm's decision to trade. The first chapter studies the firm-characteristics that shape the use of trade credit decisions in international trade. Trade credit is widely used in firm-to-firm transactions, domestically, and internationally. The literature has found that country-specific features, such as interest rates, legal institutions, the rule of law, and capital controls, affect the decision to extend trade credit. The literature has not studied additional features that might explain the trade credit provision in the international context; it also has not proposed additional theories. To fill this gap, I exploit transaction-level data from Chilean customs. This data set, available for exporters and importers, includes information that describes if a given transaction was paid in advance or paid post-shipment (trade credit). Additionally, I merge this data with firm-level details provided by the Chilean Internal Tax Service. Using this data, I document new facts. Namely, large firms measured by several metrics are most likely to use trade credit compared to small firms. Motivated by these facts and to guide my empirical strategy, I propose a theory for the use of trade credit. The model has the critical assumption that firms, buyer and seller, may default on their contracts due to liquidity shocks. Depending on the size of the shock, the firm can deplete all its assets, which means it will default. This simple assumption will imply that larger firms will be less likely to default since they have enough assets to absorb the liquidity shock. The predictions of the model are confirmed using regression analysis; therefore, not only country-specific attributes but also firm characteristics affect the contract decision: large exporters (importers) are 15% (40%) more likely to sell (buy) under trade credit compared to small exporters (importers). I also find that a small exporter matched with a large importer is 3-10% more likely to sell under trade credit. In the second chapter, we propose a theory for the use of trade credit that connects the markup that the exporter charges to the decision of extending trade credit. The key idea is that under pre-payment, the buyer needs to pay the full amount to the seller before receiving the goods. This payment requires liquidity equal to the total invoice, which in turn corresponds to the production cost plus a markup. In contrast, extending trade credit might be cheaper since the seller only needs to cover its production costs in advance, which is lower than the intermediate price due to the presence of markups. If financial intermediation is costly and the lending interest rate is greater than the deposit rate, then this difference in liquidity needs between pre-payment and trade credit affects profits, affecting the decision to provide trade credit. We test the implications of the theory using Chilean data. First, we construct markup estimates at the firm-product level, using detailed data on inputs and outputs of Chilean plants using the methodology developed by De Loecker, Goldberg, Khandelwal, and Pavcnik (2016). We then use transaction-level Customs data with information on the payment choice to test the model's predictions. We find that trade credit use increases in the markup and that this effect is larger, the bigger the difference between the buyer's borrowing rate and the seller's deposit rate is. the final chapter proposes and tests an alternative theory. Trade credit is used as a quality guarantee. There are two main facts in existing theories that explain the use of trade credit. First, all these theories focus on explaining the extension of trade credit or not, but not the length of the contract. Secondly, and most importantly, some empirical evidence does not speak to these models. Particularly, most of the existing theories conclude that trade credit is used due to access to cheaper credit or as an enforcement mechanism, then restricting the credit period, say to 30 days maximum, should not alter those incentives. However, the finance literature has found that this type of regulation has effects on the economy. Some authors have found that limiting the trade credit period to 30 days has positive effects, from the seller's perspective, through more competition due to the increase in firm entrance and a decrease in exit rates. However, in the same literature, other papers have shown that these laws also have adverse effects, namely, a reduction in the likelihood and volume of trade. The previous evidence indicates that the length of trade credit is also essential to understand the decision and its impact on the firm's behavior. Following Long, Malitz, and Ravid (1993), I propose the theory that trade credit serves as a signal for the quality of the product. In a nutshell, the model assumes that when the quality is not observable, but verifiable ex-post, trade credit can serve as a signal of the product's quality. The logic of the theory is that a buyer will not pay the transaction until she is sure that what she bought is what was agreed upon. Additionally, in this model, trade credit maturity serves a quality guarantee. Longer maturities imply that the buyer has more time to verify the contracted quality. This theory has the main prediction that the provision and maturity of the trade credit are positively related to the quality of the product. To test these predictions, I use a data set from the Chilean Customs. This transaction-level data set has a unique feature: the number of days at which a transaction was paid, on the addition of the usual measures such as destination, price, and quantity. As for quality measures, I will follow two strategies. First, I will use an off-the-shelf methodology that infers quality from prices and quantities, assuming a particular demand elasticity. Secondly, I will focus my attention on a specific industry, wine. For wine, I web-scrapped information of ratings, awards, and retail prices under the assumption that this data captures wine quality. The data confirms the main predictions of the model. I find that high-quality goods are more likely to be sold under trade credit. Moreover, regarding the other predictions, I find that high-quality products have 20 more days of trade credit, out of an average of 100 days.

Download or read book Three Essays on Trade Credit Theory and Empirical Evidence from Agro food Firms in Africa and United States written by Stanley Kojo Dary and published by . This book was released on 2017 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a quest to understand the motives for use of trade credit in inter-firm trade, many theories have been put forward. The empirical literature on trade credit are largely focused on understanding firms' motives for use of trade credit, by testing these theories with micro- and macro-level data. Against the background that the extent and motives for use of trade credit in the agro-food industry is less understood, this dissertation extends the frontiers of knowledge on trade credit use by examining trade credit theories and empirical evidence from agro-food firms in Africa and the United States. The dissertation consists of three essays. The first essay examines trade credit contracts, trade credit theories and empirical evidence in support of or otherwise of the theories via review and analysis of the theoretical and empirical trade credit literature. The second essay examines the motives for trade credit supply in the African agro-food manufacturing industry, employing survey data from eight African countries - Burundi, Malawi, Mauritania, Namibia, Nigeria, Senegal, South Sudan and Sudan. Premised on the fact that there are benefits and costs of investing in trade credit, the third essay examines investment in trade credit and firm profitability, using a panel of listed agro-food firms in the United States for the period 2001-2014. The review in essay one revealed a high use of trade credit in inter-firm trade, with variations across countries and industries. It is revealed that trade credit contracts are simple in nature and factors such as the shortness of credit periods, frequency of transactions, close proximity and interaction between suppliers and customers, and effective informal enforcement mechanisms may account for the simplified nature of trade credit contracts. However, the use of trade credit is a multidimensional phenomenon, driven by varied yet interconnected motives, thus making it complex to put forward a single theory to explain the use of trade credit in interfirm trade. Contrary to a long-held notion that trade credit is expensive relative to bank credit, evidence from the empirical literature suggests the opposite. In general, there is more empirical support for the theories of trade credit. The empirical results show a high participation of agro-food firms in trade credit activity in African countries and the United States. While within-industry variability in trade credit activity is not statistically significant in the African agro-food industry, there is significant within-industry variability in the United States. However, there is statistically significant variability in trade credit activity across agro-food firms in the African countries studied. The empirical results from essay two show that the level of trade credit supply increases with manager experience, degree of product diversification, overdraft availability from banks, trade credit from input suppliers and location in capital city. The results provide evidence in support of financing (particularly liquidity and redistribution) and commercial (particularly marketing and quality guarantee) theories of trade credit. Essay three found evidence of a non-linear (inverted U) relationship between trade credit investment and firm profitability, reflecting benefits and costs of trade credit investment. This finding suggest that agro-food firms should be guided by benefit-costs off in their trade credit investment decisions. The study found the threshold of trade credit investment beyond which the relationship between trade credit investment and firm profitability transition from positive to negative. In general, the empirical results show that trade credit is an important source of short-term financing for agro-food firms in African countries and the United States, and should be facilitated through policy.

Download or read book An Essay Upon Trade and Publick Credit The Second Edition Corrected written by and published by . This book was released on 1714 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Capital Structure and Trade Financing written by Klaus Hammes and published by Department of Economics School of Economics and Commercial Law Go. This book was released on 2003 with total page 188 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Two Essays on Entrepreneutial Finance written by Zilong Liu and published by . This book was released on 2016 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contains two essays that study the credit channel and ownership structure in entrepreneurial firms. In the first essay, we study the trade credit and bank credit usage among entrepreneurial firms. Even during the latest credit crunch, there is no substitution between supplier and bank lending among the young firms. The overwhelming majority of firms borrowing from suppliers have sufficient undrawn amounts in their revolving bank lines to cover their financing needs. When firms have trouble obtaining bank credit, trade credit actually declines. Therefore, supplier lending is unlikely to be the financing form of last resort. Suppliers' lending decisions are primarily driven by a client's sales, whereas banks' lending decisions are not tied to firms' financial conditions. Availability of trade credit does not help to obtain bank credit, and vice versa. In the second essay, we examine ownership structure among a panel of entrepreneurial firms. Variations in these firms' ownership structure are overwhelmingly determined by the unobserved firm fixed effects. After we control for firm fixed effects, there is no relation between ownership structure and firm performance. More importantly, despite a lack of resale markets for their shares, these firms show substantial ownership structure changes over time, and growth potential and demand for external capital seems to be main reason why some firms dilute their ownership structure. Using both a propensity score matching method and a difference-in-difference regression method, we do not find evidence that ownership structure changes affect subsequent firm performance among our sample firms. Finally, ownership structure does not affect firms' survival probability.

Download or read book Hayek s Triangles Two Essays On The Business Cycle written by and published by Laissez Faire Books. This book was released on with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Essay Towards Regulating the Trade and Employing the Poor of This Kingdom The Second Edition written by John Cary and published by BoD – Books on Demand. This book was released on 2023-09-25 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on International Trade Capital Flows and Financial Frictions written by Maria Margarita Lopez Forero and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two particular concerns in international economics motivate this research: I. How are real and financial activities related to each other in a globalized economy? II. What role do financial frictions play in this relationship ? Three essays look at these questions from different perspectives. The first chapter, in collaboration with Jean-Charles Bricongne and SebastianFranco-Bedoya, revises the old question on the relation between FDI and exports on French firms, where theory seems to be at odds with empirical findings. Most FDI and most trade take place between rich markets, where the horizontal investment type is expected to happen. In this sense, empirical studies have almost invariably found a complementarity relation while standard Horizontal FDI models predict substitutability between FDI and exports given the proximity-concentration trade-off. [...]The second chapter empirically examines how external financial needs measured at the sector level- and financial development at the country level interact to shape the aggregate marginal product of capital of a country (MPK) and its foreign direct investment inflows (FDI). First, using new available data we construct annual aggregate MPK for 50 developing and developed countries during 1995-2008; we use industry-level data to construct an annual country-level measure of external financial dependence and assess its effects on MPK conditional on the level of financial development. Our findings imply that financial development seems to be a necessary condition -and certainly not a sufficient one- in order for production in financially dependent sectors to positively affect aggregate MPK in developing countries. Second, using bilateral FDI inflows in developing countries between 2001 and 2010, we analyze how external financial dependence and financial development determine FDI in flows in developing countries. [...]The third chapter, joint research with Jean-Charles Bricongne and Fabrizio Coricelli, studies the transmission of global shocks during the Great Recession and its impact on French employment. Particularly, we explore the role of trade credit in the propagation of cross-border shocks. Using a sub-sample of importing enterprises that were active over 2004-2009,our findings imply that strong pre-crisis sourcing ties with countries that were more resilient to the global crisis, translated into better performance in terms of employment growth over 2008-2009. This effect dramatically varies with trade credit intensity. Strongly relying on trade credit made firms more vulnerable to unanticipated shocks, for which the adverse impact of the crisis was exacerbated. This effect intensified among firms with important sourcing ties with severely shocked countries. While the negative effect of the crisis was mitigated when sourcing relations with countries subject to milder shocks were stronger. Supporting, therefore, the hypothesis that trade credit was an alternative source of financing for enterprises during the crisis, where implicitly borrowing from suppliers helped importers overcoming financial constraints. Our contribution to the literature adds to the debate on the role of trade finance in explaining the real economic downturn across borders.

Download or read book An Essay Towards Regulating the Trade and Employing the Poor of This Kingdom written by John Cary and published by Good Press. This book was released on 2021-11-05 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: This edition represents a social study by John Cary. The study shows in detail the damaging and unjust economic conditions, commercial policy, debt collection practices and the conditions in which the poorest people lived and worked in the 18th century in Great Britain.

Download or read book Hague Zagreb Essays 6 written by Cornelis Carel Albert Voskuil and published by BRILL. This book was released on 1987-01-01 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays in International Finance written by Byong-Ju Lee and published by Stanford University. This book was released on 2011 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three essays on international finance. The first essay is "Exchange rates and Fundamentals". A new open interest rate parity condition that takes account of economic fundamentals is developed from stochastic discount factors (SDFs) of two countries. Through this parity condition, business cycles or fundamentals are linked to exchange rates. Key empirical findings from this parity condition are as follows. First, this model beats the random walk hypothesis: economic fundamentals explain exchange rate movements for high interest rate currencies. Exchange rates of low interest rate currencies act like a random walk because they are less correlated with fundamentals owing to their low risk. For example, U.S. business cycles explain the direction of changes in exchange rates against the dollar. The same thing is true for Japan. Second, this model resolves the forward premium puzzle: the forward premium puzzle is not a general characteristic as regarded in previous studies. It happens when the risk awareness of investors is low, during economic expansions and for low risk currencies. The second essay is "Carry Trade and Global Financial Instability". Carry trade, an opportunistic investment strategy that takes advantage of interest rate differential across countries, is identified the cause of the large-scale depreciations of peripheral currencies in the later half of 2008. A simultaneous equations model, which is derived from a conceptual partial equilibrium model for a local foreign exchange market, is estimated from a cross-sectional sample. The results suggest that the larger appreciation of the yen than the dollar was brought about by a lack of the local supply of the yen rather than a more severe crunch of yen credits. The third essay is "The Economic Origin of Letters of Credit". This essay discusses the economic origin of letters of credit, an instrument widely used in international trade. A game theoretical analysis shows that letters of credit improve efficiency in trade settlements, increasing returns in trade. A few notable facts on letters of credit are discussed. First, the new institution is adopted by merchant banks to maximize their profits and in the process, an improvement in efficiency of international transactions is obtained. Second, the organization established by the legacy institution, bills of exchange, played a critical role in adopting the new institution. Third, the legal enforcement is not essential in this economic institution. Finally, two drivers are identified that improve efficiency of transactions: concentration and projection.

Download or read book The Example of France written by Victor Bonnet and published by . This book was released on 1875 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on International Trade written by Kairong Chen and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is comprised of three chapters focusing on international trade policy and trade finance. My first chapter studies the effects of trade policy uncertainty on US firms' global value chain relationships. Using earnings call transcripts, I apply a text-based method to measure the trade policy uncertainty perceived by firms. With the new measures, I then estimate the effects of trade policy uncertainty shocks on firms' investment, inventory, and global adjustment in the supply chain. I find that US firms' foreign customers are negatively associated with trade policy uncertainty. In contrast, their foreign suppliers are not significantly associated with trade policy uncertainty, implying that US firms have a strong reliance on foreign supply. In my second chapter, I study the interdependence between trade policy and capital control from a terms-of-trade manipulation perspective. I extend the dynamic two-country multi-good endowment economy in Costinot et al. (2014) with trade taxes. Home country chooses optimal taxes on all tradable goods and international capital flows to maximize domestic welfare, while the foreign country is passive. When only good-specific trade taxes/subsidies are available, Home has an incentive to manipulate tariffs to depreciate its real exchange rate, if it has faster-growing endowment than the Foreign. Moreover, I find that taxing capital inflow is equivalent to a uniform reduction in trade tariffs on all goods. My third chapter studies how firms determine payment methods and transportation modes jointly in international trade. This chapter incorporates choices of transportation mode into a model of trade finance, and exploits Chilean import data to examine the model's implications. In cash-in-advance or post-shipment payment cases, firms use fast transportation to reduce financial costs caused by delayed repayment for borrowers and mitigate non-payment risk of importers. Meanwhile, it creates a high freight cost. In contrast, a letter of credit separates the goods shipment and payment flow in practice and substitutes trading partners' default risk with banks' credit risk.vEmpirical analysis reveals that a transaction using airborne cargo is less likely to be on a letter of credit.

Download or read book Greed written by Julian Edney and published by iUniverse. This book was released on 2005-06 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is an immensely wealthy society but it is not a humane society. Greed has become a force creating precipitous inequalities, and divisions in this society now approach a kind of wealth apartheid, but greed is rarely seen as a moral wrong. This is not the first time the nation has produced huge economic inequalities. Today, as the free market continues its global advance, the values of democracy are being torn. Two ideologies popular in the era of robber barons appear to be rising again: laissez-faire and Social Darwinism. Freedom, coercion, debt, credit cards, meritocracy, sociopaths, environment and corporations are all examined. Is exploitation wrong? The free market conceals a cultural contradiction: the everyday workplace vs. democracy. How can we hope to export democracy if we don't have it? Our economic theory is antiquated and we need to step a little closer to modern reality. What motivates people in today's society: is it the pursuit of happiness, or is it surviving in an endless round of work-and-debt? Or is it the avoidance of fear? Remedies and how you can make a difference.

Download or read book Two Essays in International Trade and Development written by Tanmay Belavadi and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two chapters on two topics in development and international trade. In Chapter 1, I study the phenomenon of some large developing countries deviating from the expected pattern of non-agricultural informality declining with income growth. I focus on the striking case of India where informality in manufacturing fell only by 1\% from 1999-00 to 2009-10 while per-capita income more than doubled. On the demand side, I find that the informal expenditure share Engel for manufactured goods is downward sloping but not log-linear, implying that the distribution of income gains matters. In particular, the Engel effect is the weakest among households at the top of the income distribution, who experienced the greatest gains in this period. On the supply side, income growth is correlated with more schooling, which is expected to aid formalization because formal firms are skill intensive. In India, while educational attainment improved, increased capital use further displaced lower skill workers from formal manufacturing firms. Consistent with these findings, I add product dualism with varying income elasticity of informal expenditure, worker heterogeneity, and capital to the conventional informality framework of heterogeneous firms asymmetrically impacted by regulations and taxes. Cheaper capital imports following trade liberalisation, a positive shock to domestic capital supply, and technological change all contribute to increased skill selectivity among formal manufacturing firms. Without these shocks, I estimate that the observed improvement in the educational composition of the manufacturing workforce would have lowered manufacturing informality by 2.7%. In addition, if income growth among the wider non-manufacturing workforce had been equally distributed instead of top-decile concentrated, I estimate that manufacturing informality would have been reduced by a total of 8.6%. In Chapter 2, I study how introducing endogenous bankruptcy into a model of exporting with financial constraints affects the entry of firms into foreign markets. The financial constraints and exporting literature has long modelled a fixed cost of exporting as a crucial financial obstacle to overcome, creating a theoretical link between financial constraints and export participation. Previous work (Eaton et al. (2007)), has also shown that a large fraction of new exporting firms fail to continue exporting beyond the first year. Static models of exporting with financial constraints cannot fully internalise the effect of borrowing which finances an unsuccessful export venture on a firm. In this chapter, I present a dynamic model of firms in a two country environment with external borrowing and endogenous bankruptcy. I use a panel data-set of Colombian manufacturing firms combining financial performance and export information to calibrate the model, and find that the introduction of endogenous bankruptcy significantly distorts firm entry and exit both directly and by means of precautionary effects. While the effect of endogenous bankruptcy on the fraction of firms that attempt exporting in their lifetime is modest, it delays exporting by reducing the use of credit by 65% and forcing firms to rely on their internal savings to pay the fixed cost instead. It also makes an exit from exporting in the first year more likely by making it harder for the firm to ride out shocks while remaining in the export market. By reducing the tenure of firms in the export market, endogenous bankruptcy has a substantial 6.3% effect in reducing the extensive margin of exporting in a given year.