How Firms Overcome Weak International Contract Enforcement: Repeated Interaction, Collective Punishment and Trade Finance

Olsen, Morten

doi:10.2139/ssrn.2219243

Cited by 23 publications

(26 citation statements)

References 22 publications

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“…In particular, we argue that export risk arising from information asymmetries or payment enforcement difficulties can be mitigated through bank linkages. Bank linkages can help enforce or guarantee payments, as in Olsen (2013) and Niepmann and Schmidt-Eisenlohr (2013). In addition, banks are likely to have access to information on the creditworthiness of potential importers, and they may pass on this information to banks in exporting countries to which they are connected, information which may then be passed on to exporting firms.…”

Section: Introductionmentioning

confidence: 99%

Bank linkages and international trade

Caballero¹,

Candelaria

Hale

2018

Journal of International Economics

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This paper shows that bank linkages have a positive effect on international trade. A global banking network (GBN) is constructed at the bank level, using individual syndicated loan data from Loan Analytics for 1990-2007. Network distance between bank pairs is computed and aggregated to country pairs as a measure of bank linkages between countries. Data on bilateral trade from IMF DOTS are used as the subject of the analysis and data on bilateral bank lending from BIS locational data are used to control for financial integration and financial flows. Using a gravity approach to modeling trade with country-pair and year fixed effects, the paper finds that new connections between banks in a given country-pair lead to an increase in trade flow in the following year, even after controlling for the stock and flow of bank lending between the two countries. It is conjectured that the mechanism for this effect is that bank linkages reduce export risk, and four sets of results that support this conjecture are presented.

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Section: Introductionmentioning

confidence: 99%

Bank linkages and international trade

Caballero¹,

Candelaria

Hale

2018

Journal of International Economics

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“…Section 4 concludes. 4 For theoretical contributions to trade finance see Schmidt-Eisenlohr (2013), Ahn (2010), Antràs and Foley (2011 and Olsen (2013). See Schmidt-Eisenlohr (2013) for a review.…”

Section: Introductionmentioning

confidence: 99%

“…Results are available upon request. 30 For details on the methodology seePapke and Wooldridge (1996). SeeRamalho et al (2011) for a survey.…”

mentioning

confidence: 99%

Payment choice in international trade: Theory and evidence from cross‐country firm‐level data

Hoefele¹,

Schmidt‐Eisenlohr

2016

Canadian J of Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. When trading, firms choose between different payment contracts. As shown theoretically in Schmidt-Eisenlohr (forthcoming), this allows firms in international trade to optimally tradeoff differences in financing costs and enforcement across countries. This paper provides evidence from a large number of countries that shows that country characteristics are indeed central determinants of the payment contract choice. As predicted, the use of open account decreases in financing costs and contract enforcement in the source country. We extend the theory and test two additional predictions. First, we show that the more complex the industry of a firm, the more important is the quality of contract enforcement and the less important are the financing costs for the contract choice. Second, we compare direct and indirect exporters and find evidence that suggests that intermediaries play a relevant role in contract enforcement across borders. Terms of use: Documents inJEL-Code: F120, F300, G210, G320.

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“…Their results further suggest that the use of post shipment method (OA) increases as the relationship between trading partners develops. In addition to the aforementioned studies, some studies have explicitly dealt with only one method of payment in great detail, namely L/C (see Glady and Potin, 2011;Ahn, 2011Ahn, , 2013Olsen, 2013;and Niepmann and Schmidt-Eisenlohr, 2013).…”

Section: A Review Of the Theoretical And Empirical Literature On Tradmentioning

confidence: 99%

Evolving Patterns of Payment Methods in Turkish Foreign Trade

Türkcan

2017

EconWorld

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Serving the global marketplace brings many risks to the firms that they may not have on the domestic side. Apart from financing, trade finance mechanisms assist exporters and importers to mitigate or reduce their risks associated with doing business internationally. Finally, the evidence show that both exporters and importers started to use cashin advance method, the safest method of payment, more intensively than other methods shortly after the global recession in 2008. Overall, the patterns presented in this paper highlight the fact that Turkish traders are not able to set payment terms that are highly favorable to themselves and bear all risks associated with international trade transactions.

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How Firms Overcome Weak International Contract Enforcement: Repeated Interaction, Collective Punishment and Trade Finance

Cited by 23 publications

References 22 publications

Bank linkages and international trade

Bank linkages and international trade

Payment choice in international trade: Theory and evidence from cross‐country firm‐level data

Evolving Patterns of Payment Methods in Turkish Foreign Trade

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