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31/03/2020
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Doan, N. T., Nguyen, K. T., & Mai, P. C. (2022). The effects of cash in advance on export decision: the case of Vietnam. Journal of International Economics and Management, 20(1), 42-52. https://doi.org/10.38203/jiem.020.1.0003
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The effects of cash in advance on export decision: the case of Vietnam
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Abstract
This paper investigates the effect of cash in advance (CIA) on the export decision in Vietnamese firms in the face of financial and institutional constraints. We find that the CIA has a positive relationship with the probability of export in the institutionally constrained firms, and this effect becomes pronounced when those firms are small and medium-sized or also suffer financial constraints. This finding suggests that the CIA does help firms export by mitigating the joint effects of constraints imposed on Vietnamese small and medium-sized enterprises (SMEs).
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Keywords
Cash in advance, Export decision, SMEs, Vietnam
References
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Burkart, M., Ellingsen, T. (2004), “In-kind finance: a theory of trade credit”, American Economic Review, Vol. 94 No. 3, pp. 569-590.
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Chaney, T. (2016), “Liquidity constrained exporters”, Journal of Economic Dynamics and Control, Vol. 72, pp. 141-154.
Daripa, A., Nilsen, J. (2011), “Ensuring sales: a theory of inter-firm credit”, American Economic Journal: Microeconomics, Vol. 3 No. 1, pp. 245-79.
Eck, K., Engemann, M., Schnitzer, M. (2015), “How trade credits foster exporting”, Review of World Economics, Vol. 151 No. 1, pp. 73-101.
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Guariglia, A., Mateut, S. (2010), “Inventory investment, global engagement, and financial constraints in the UK: evidence from micro data”, Journal of Macroeconomics, Vol. 32 No. 1, pp. 239-250.
IMF (2009), Sustaining the recovery, World Economic and Financial Survey, Washington, DC: International Monetary Fund.
Hoefele, A., Schmidt-Eisenlohr, T. and Yu, Z. (2016), “Payment choice in international trade: Theory and evidence from cross-country firm-level data”, Canadian Journal of Economics/Revue Canadienne d’économique, Vol. 49 No. 1, pp. 296-319.
Klapper, L., Laeven, L. and Rajan, R. (2011), “Trade credit contracts”, The Review of Financial Studies, Vol. 25 No. 3, pp. 838-867.
Lee, Y.W., Stowe, J.D. (1993), “Product risk, asymmetric information, and trade credit”, Journal of Financial and Quantitative analysis, Vol 28 No. 2, pp.285-300.
Long, M.S., Malitz, I.B. and Ravid, S.A. (1993), “Trade credit, quality guarantees, and product marketability”, Financial Management, Vol. 22 No. 4, pp. 117-127.
Ma, Z., Yu, M., Gao, C., Zhou, J. and Yang, Z. (2015), “Institutional constraints of product innovation in China: evidence from international joint ventures”, Journal of Business Research, Vol. 68 No. 5, pp. 949-956.
Manova, K. (2012), “Credit constraints, heterogeneous firms, and international trade”, Review of Economic Studies, Vol 80 No. 2, pp. 711-744.
Mateut, S. (2014), “Reverse trade credit or default risk? Explaining the use of prepayments by firms”, Journal of Corporate Finance, Vol.29, pp.303-326.
Mateut, S., Zanchettin, P. (2013), “Credit sales and advance payments: substitutes or complements?”, Economics Letters, Vol. 118 No. 1, pp. 173-176.
Melitz, M.J. (2003), “The impact of trade on intra-industry reallocations and aggregate industry productivity”, Econometrica, Vol. 71 No. 6, pp. 1695-1725.
Muûls, M. (2015), “Exporters, importers and credit constraints”, Journal of International Economics, Vol. 95 No. 2, pp. 333-343.
Nguyen, N., Gan, C. and Hu, B. (2015), “An empirical analysis of credit accessibility of small and medium sized enterprises in Vietnam”, Banks & Bank Systems, Vol. 10(No1), pp. 34-46.
Schmidt-Eisenlohr, T. (2013), “Towards a theory of trade finance”, Journal of International Economics, Vol. 91No. 1, pp. 96-112.
Stiebale, J. (2011), “Do financial constraints matter for foreign market entry? A firm-level examination”, The World Economy, Vol. 34 No. 1, pp. 123-153.
Tomiura, E. (2007), “Effects of R&D and networking on the export decision of Japanese firms”, Research Policy, Vol. 36 No. 5, pp. 758-767.
Tran, Q.T. and Bui, D.T.D. (2018) “Firm characteristics, perceived obstacles of institutional environment and export performance: evidence from Vietnamese exporting firms”, External Economics Review, No. 108, pp. 20-28.
Wagner, J. (2012), “International trade and firm performance: a survey of empirical studies since 2006”, Review of World Economics, Vol. 148 No. 2, pp. 235-267.
Antras, P., Foley, C.F. (2015), “Poultry in motion: a study of international trade finance practices”, Journal of Political Economy, Vol. 123 No. 4, pp. 853 - 901.
Biais, B., Gollier, C. (1997), “Trade credit and credit rationing”, The Review of Financial Studies, Vol. 10 No. 4, pp. 903 - 937.
Burkart, M., Ellingsen, T. (2004), “In-kind finance: a theory of trade credit”, American Economic Review, Vol. 94 No. 3, pp. 569-590.
Chaney, T. (2005), Productivity overshooting: The dynamic impact of trade opening with heterogeneous firms, University of Chicago.
Chaney, T. (2016), “Liquidity constrained exporters”, Journal of Economic Dynamics and Control, Vol. 72, pp. 141-154.
Daripa, A., Nilsen, J. (2011), “Ensuring sales: a theory of inter-firm credit”, American Economic Journal: Microeconomics, Vol. 3 No. 1, pp. 245-79.
Eck, K., Engemann, M., Schnitzer, M. (2015), “How trade credits foster exporting”, Review of World Economics, Vol. 151 No. 1, pp. 73-101.
Ghecham, M.A. (2006), Formal and informal institutional constraints and the performance of firms in developing economies: The case of Egypt, available at SSRN https://papers. ssrn.com/sol3/papers.cfm?abstract_id=938099.
Greenaway, D., Guariglia, A., Kneller, R. (2007), “Financial factors and exporting decisions”, Journal of International Economics, Vol. 73 No. 2, pp. 377-395.
Guariglia, A., Mateut, S. (2010), “Inventory investment, global engagement, and financial constraints in the UK: evidence from micro data”, Journal of Macroeconomics, Vol. 32 No. 1, pp. 239-250.
IMF (2009), Sustaining the recovery, World Economic and Financial Survey, Washington, DC: International Monetary Fund.
Hoefele, A., Schmidt-Eisenlohr, T. and Yu, Z. (2016), “Payment choice in international trade: Theory and evidence from cross-country firm-level data”, Canadian Journal of Economics/Revue Canadienne d’économique, Vol. 49 No. 1, pp. 296-319.
Klapper, L., Laeven, L. and Rajan, R. (2011), “Trade credit contracts”, The Review of Financial Studies, Vol. 25 No. 3, pp. 838-867.
Lee, Y.W., Stowe, J.D. (1993), “Product risk, asymmetric information, and trade credit”, Journal of Financial and Quantitative analysis, Vol 28 No. 2, pp.285-300.
Long, M.S., Malitz, I.B. and Ravid, S.A. (1993), “Trade credit, quality guarantees, and product marketability”, Financial Management, Vol. 22 No. 4, pp. 117-127.
Ma, Z., Yu, M., Gao, C., Zhou, J. and Yang, Z. (2015), “Institutional constraints of product innovation in China: evidence from international joint ventures”, Journal of Business Research, Vol. 68 No. 5, pp. 949-956.
Manova, K. (2012), “Credit constraints, heterogeneous firms, and international trade”, Review of Economic Studies, Vol 80 No. 2, pp. 711-744.
Mateut, S. (2014), “Reverse trade credit or default risk? Explaining the use of prepayments by firms”, Journal of Corporate Finance, Vol.29, pp.303-326.
Mateut, S., Zanchettin, P. (2013), “Credit sales and advance payments: substitutes or complements?”, Economics Letters, Vol. 118 No. 1, pp. 173-176.
Melitz, M.J. (2003), “The impact of trade on intra-industry reallocations and aggregate industry productivity”, Econometrica, Vol. 71 No. 6, pp. 1695-1725.
Muûls, M. (2015), “Exporters, importers and credit constraints”, Journal of International Economics, Vol. 95 No. 2, pp. 333-343.
Nguyen, N., Gan, C. and Hu, B. (2015), “An empirical analysis of credit accessibility of small and medium sized enterprises in Vietnam”, Banks & Bank Systems, Vol. 10(No1), pp. 34-46.
Schmidt-Eisenlohr, T. (2013), “Towards a theory of trade finance”, Journal of International Economics, Vol. 91No. 1, pp. 96-112.
Stiebale, J. (2011), “Do financial constraints matter for foreign market entry? A firm-level examination”, The World Economy, Vol. 34 No. 1, pp. 123-153.
Tomiura, E. (2007), “Effects of R&D and networking on the export decision of Japanese firms”, Research Policy, Vol. 36 No. 5, pp. 758-767.
Tran, Q.T. and Bui, D.T.D. (2018) “Firm characteristics, perceived obstacles of institutional environment and export performance: evidence from Vietnamese exporting firms”, External Economics Review, No. 108, pp. 20-28.
Wagner, J. (2012), “International trade and firm performance: a survey of empirical studies since 2006”, Review of World Economics, Vol. 148 No. 2, pp. 235-267.