Cash-In-Advance Payments and Transaction Size: Cash-Constrained Importers

Yushi Yoshida (), Kemal Türkcan and Taiyo Yoshimi
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Yushi Yoshida: Shiga University
Kemal Türkcan: Akdeniz University
Taiyo Yoshimi: Chuo University

A chapter in Emerging Markets and Industrialized Countries in the New Wave of Globalization, 2025, pp 165-176 from Springer

Abstract: 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.

Keywords: Cash constraint, Cash-in-advance, Payment method; Productivity; F14 (Empirical Studies of Trade); L14 (Transactional Relationships) (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-032-04602-4_8

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DOI: 10.1007/978-3-032-04602-4_8

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