Payment Method and Invoicing Currency: Evidence from Turkish Textile and Clothing Exports

Abstract

This study examines how the payment method affects the choice of invoicing currency. Focusing on Turkish textile and clothing exports, it finds that exporters using the open account method, where payment is made after goods are received, prefer to invoice in their home currency (Turkish lira) to mitigate exchange rate risks associated with foreign currencies. This preference is more pronounced among small and medium-sized enterprises. We also find that the euro, the predominant foreign currency in our Turkish sample, is less likely to be used under the OA method. Additionally, the Turkish lira is more likely chosen as the invoicing currency when its value is higher, when exporting to fewer countries, or by less productive exporters. JEL Classification: F14 and L14