Date of Award
Doctor of Philosophy
Rebecca M. Neumann
Mohsen Bahmani-Oskooee, Scott D. Drewianka, Narayan K. Kishor
International Finance, International Trade, International Trade Credit, Trade Credit
Chapter II: "The international trade credit channel: Implications for industry investment"
Abstract: Trade credit is an important feature of many trade contracts offering buyers a means of financing purchases using credit from suppliers. This paper aims to identify a channel through which international trade credit and international trade affect industry investment. I use an interaction variable approach, first implemented by Rajan and Zingales (1998), where industries are ranked by different propensities to use trade credit according to their industry specific production properties. This ranking is then interacted with measures of aggregate trade credit and trade openness at the country level to examine how industry investment in industries with higher or lower dependence on trade credit responds to the availability of trade credit. The dataset includes 23 manufacturing industries in 20 countries from 1999-2009. Controlling for industry size along with access to and dependence on domestic external finance, I show that industries with a higher propensity to use trade credit benefit from greater international trade credit and greater trade openness in terms of a higher investment share relative to economy-wide investment.
Chapter III: "The role of international trade credit for investment volatility"
Abstract: In this study, I analyze another aspect of the link between international trade credit and industry investment. Specifically, I examine the effect of access to international trade credit on the volatility of industry investment. A decrease in aggregate investment volatility has previously been shown to be linked to a decrease in aggregate output volatility. While some literature indicates that trade credit might dampen the investment volatility by providing additional internal finance and reducing informational asymmetries where financial institutions are limited, other literature suggests trade credit might increase the investment volatility by building up credit chains, such that potential liquidity shocks might be transmitted via credit connected firms. Using data from 23 manufacturing industries in 20 countries over the period 1999-2009, I construct measures of the volatility in each industry's investment share across countries. I test the effect of various measures of trade credit, while accounting for the industry propensity to use trade credit. My initial results imply that higher average international trade credit in trade credit dependent industries increases the volatility in the investment share.
Chapter IV: “The link between International Trade Credit and Industry value added”
Abstract: In this paper, I aim to examine the role of international trade credit on industry value added. Rajan and Zingales (1998) and many other authors suggest that well developed financial institutions play a crucial role for growth in value added. Fisman and Love (2003) expand this idea to the usage of trade credit and show that more trade credit dependent industries have higher industry growth in value added in countries with weak financial institutions. These findings suggest that firms in countries with a lack of access to external finance substitute trade credit for bank credit. In this paper, I examine explicitly the impact of international trade credit. While Fisman and Love (2003) use a cross sectional dataset and regress a 10 year compounding growth rate in industry value added on interactions between financial development and external finance dependence and trade credit dependence, I make use of a panel dataset using the value added share as the dependent variable. The dataset includes 23 manufacturing industries in 30 countries from 1986-2010. Controlling for the different countries’ levels of overall development along with access to and dependence on domestic external finance, I show that industries with a higher propensity to use trade credit exhibit a higher value added share when international trade credit is less available, consistent with Fisman and Love’s finding on financial development and suggestive that international trade credit is a poor substitute for domestic financial development
Imlau, Sarah Isa, "The International Trade Credit Channel: Implications for Industry Performance" (2017). Theses and Dissertations. 1490.