ETSG 2022 Groningen Twenty-third Annual Conference, Groningen, Netherlands, 08 September 2022
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.