Perceptions of export credit insurance value: Australian evidence

Abstract

Purpose -The purpose of this paper is to examine Australian exporter perceptions of export credit insurance (ECI) value and ECI value drivers to help uncover how Australian (and other) exporters can optimize their ECI use. Design/methodology/approach -This paper uses a 1,000 firm survey of how Australian ECI users and non-users perceive the value of often-cited attributes of ECI and multiple regression analysis to create a model of ECI value drivers. Findings -Most ECI value is derived from the increased trade exporters can manage with ECI protection and from improved access to trade finance. Clear differences are observable in perceived ECI value between larger and smaller exporters as well as between ECI users and non-users. Originality/value -This paper provides the first evidence of perceived ECI value to Australian exporters as well as differences between ECI users and non-users. Export credit insurers and export support agencies need to focus on these differences to ensure that ECI is being optimally marketed and used by Australian exporters.

Trade credit insurance in a capital‐constrained supply chain

“…It also increases product sales, which is consistent with Rienstra‐Munnicha and Turvey (), Zammit et al. (), and Li et al. ().…”

“…Moreover, compared to the uninsured benchmark, insurance leads to an increase in the trade credit amount and better financing terms (a lower wholesale price); these outcomes differ from those in Zammit et al. () and Li et al. ().…”

“…For example, Funatsu () explores the influence of export credit insurance on export decisions and finds that the adoption of insurance depends on a firm's attitude toward risk. Several papers use mathematical model analysis to show that insurance promotes product sales (Ford et al., ; Zammit et al., ; Li et al., ). Rienstra‐Munnicha and Turvey () verify this result empirically.…”

“…Rienstra‐Munnicha and Turvey () verify this result empirically. Insurance increases the probability of acquiring bank financing, but it does not lead to better financing terms offered by a bank or more trade credit obtained from a firm's suppliers (Zammit et al., ). In contrast, by contingent claims analysis, insurance allows a firm to obtain more investments and financing at lower cost (Soumaré et al., 2010).…”

Empirical Investigation of the Effects of Industry Type and Firm Size on Export Barriers

“…Research has also focused on export credits, covering the multiple aspects of this activity, particularly insurance (Zammit et al 2009). One of the problems stems from to a greater or lesser extent generalized handicap for firms at this level, and as stressed above particularly when starting out on their activities outside the home market, there is a tendency for some degree of public intervention justified as being for the "public good" with regard to "market failures" and providing an effective subsidy for exports with such policies discussed in Easterly et al (2009).…”