Trade Credit, International Trade Costs and Exports: Cross-Country Firm-Level Evidence

9 Pages Posted: 22 Apr 2014 Last revised: 12 Nov 2014

See all articles by Xiao Wang

Xiao Wang

University of Science and Technology of China

Date Written: April 21, 2014

Abstract

This paper finds that firms’ trade credit, the financing provided by upstream input suppliers along the supply chain, plays an important role in determining firms’ exportation. In a panel data set of manufacturing firms in 25 Eastern European and Central Asian countries between 2001 and 2007, we employ international trade cost shocks to identify the causal impacts of trade credit on firms’ exportation. We find that when trade costs decline, firms with less trade credit increase their exports disproportionately more because of the alleviation of their financing burdens. Results are robust after controlling for bank and other financing channels, country financial development, and the endogeneity of trade credit. Our findings contribute to the empirical identification of financial frictions on firms’ exports, and to the role of trade credit on firms’ performance.

Keywords: Trade Credit, Export, Trade Liberalization, Financial Frictions

JEL Classification: F12, F14, F15, F36, G30

Suggested Citation

Wang, Xiao, Trade Credit, International Trade Costs and Exports: Cross-Country Firm-Level Evidence (April 21, 2014). Available at SSRN: https://ssrn.com/abstract=2427403 or http://dx.doi.org/10.2139/ssrn.2427403

Xiao Wang (Contact Author)

University of Science and Technology of China ( email )

China

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