Cash-In-Advance Payments and Transaction Size: Cash-Constrained Importers
French-Japanese Conference on Asian and International Economies in the Era of Globalization, FJC 2024, Aix-en-Provence, France, 20 - 21 September 2024, pp.165-176, (Full Text)
- Publication Type: Conference Paper / Full Text
- Doi Number: 10.1007/978-3-032-04602-4_8
- City: Aix-en-Provence
- Country: France
- Page Numbers: pp.165-176
- Keywords: Cash constraint, Cash-in-advance, F14 (Empirical Studies of Trade), L14 (Transactional Relationships), Payment method; Productivity
- Akdeniz University Affiliated: Yes
Abstract
A high-productivity exporter can be in a stronger position when facing an importer in determining how and when payment is made. With a lower risk associated with exporters, cash-in-advance (CIA) payment is preferred by exporters. However, a baseline probit regression for the Turkish export dataset at the transaction level could not find a positive relationship between exporters’ productivity and CIA. This puzzling finding is reconciled when we consider the financial conditions of importers, which may not allow their payment in advance, especially for a large-cash transaction. We find that the transaction size discourages the use of CIA payments. We also find that the productivity of exporters is associated non-linearly, i.e., in an inverted-U shape, with the use of CIA payments.