Exporting Under Political Risk: Payment Term Selection in Global Trade

Veysel Avsar () and Oguzhan Batmaz
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Veysel Avsar: Business Economics Program, College of Business, Texas A&M University, Corpus Christi, TX 78412, USA
Oguzhan Batmaz: Department of Accounting, Economics & Finance, College of Business, Lewis University, Romeoville, IL 60446, USA

JRFM, 2025, vol. 18, issue 6, 1-20

Abstract: This paper investigates the extent to which political risk affects exporter-financed trade transactions. Using industry-level trade finance data from Turkey, we show that export transactions executed under open-account terms decrease with the political risk in the export markets. Further, we also document that the effect of political risk on trade finance is disproportionately higher for industries that export complex products. This paper contributes to the literature by examining how political risk interacts with product complexity to influence exporters’ trade finance decisions—an effect that has been previously overlooked in empirical studies.

Keywords: political risk; trade finance; method of payments; open account; exporter-financed trade (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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