• The Journal of Asian Finance, Economics and Business
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• v.7 no.11
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• pp.303-314
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• 2020

This paper investigates the relationships between bank credit and trade credit with profit of 130 agricultural firms listed on Vietnam's stock exchanges during the period 2008-2014. Using the GMM approach, the paper reveals inverted-U shaped (∩) relationships between bank credit and trade credit with profit. Specifically, the optimal threshold of bank credit and trade credit to total assets of the firms are 0.4173 and 0.2425, respectively. The findings mean that if the ratio of bank credit to total assets exceeds the benchmark of 0.4173, firms should consider restructuring debts to get them back to the benchmark. To do so, firms should withdraw from those business fields that are not of their profession, in addition to liquiditizing unused assets to repay debts and not using short-term credit to invest in long-term projects. Firms may use trade credit wisely when other sources of finance are lacking. In concrete terms, firms can increase trade credit use if the ratio of trade credit to total assets is below 0.2425. Yet, if this ratio goes beyond this benchmark, firms should get back to this benchmark, e.g., keeping a suitable amount of inventory. The implications of this study is to boost firm growth in the proposed way.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.7
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• pp.35-47
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• 2020

An economic downturn can occurred through unexpected events in various fields, such as the subprime mortgage crisis and the outbreak of Coronavirus Disease-2019 (COVID-19). Trade credit is important for small- and medium-sized enterprises (SMEs), especially during a monetary contraction, as it is the last option for firms that lack bank credit. This study aims to determine whether trade credit is profitable for the buyer and supplier firms during and after a financial crisis. We use panel data consisting of all trade credit transactions and financial statements of 5,751 Korean firms during the period 2008-2012. It shows that trade credit is more profitable for both buyers and suppliers in the post-crisis period than during the crisis. Moreover, trade payable is more effective for unconstrained buyers than for constrained buyers. Finally, a mixed strategy is superior to an aggressive or passive strategy of SMEs. The results suggest less profitability of trade credit during a period of contraction and greater sensitivity of the buyer SMEs, emphasizing the idiosyncratic liquidity strategy of each firm. This study can be helpful to develop a strategy of profitable trade credit for SMEs and to establish a policy of managing liquidity for the authority.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.4
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• pp.171-180
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• 2021

The purpose of this paper is to estimate the impact of credit rationing on the amount of trade credit used by farmers in Vietnam. This study employs a survey data collected through direct interviews with heads of 1,065 rice households randomly selected out of provinces and city in the Mekong River Delta (MRD). In each province or city, the village with the largest area of land devoted to rice production from the district with the largest area of land devoted to rice production was picked up for survey. In each village, 200 rice farmers were randomly chosen for interview. Based on a probit model and a semi-parametric propensity score matching (PSM) estimator while controlling socio-demographic traits of rice farmers, the estimated results show that non-credit rationed farmers use less trade credit to finance production compared to their credit rationed counterparts. Moreover, the amount of trade credit used by farmers decreases as the degree of credit rationing drops. This paper provides evidence of the substitutive relationship between bank credit and trade credit. It also implicitly suggests that banks can drive trade creditors out of the market if they manage to solve the problem of information asymmetry and transaction cost.

• The Journal of Information Technology
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• v.3 no.4
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• pp.23-40
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• 2000

Because the international trading community has witnessed a number of significant technical and commercial changes, documentary credit practices will quite clearly need to be updated to meet both the business and technical demands of the latest commercial and technical developments in international trade. The potential for developing "paperless credit" should, therefore, be examined. TradeCard is a B2B(business-to-business) e-commerce infrastructure that enables buyers and sellers to conduct and settle international trade transactions securely over the Internet and objective of TradeCard is to provide a secure, reliable cost-effective and user-friendly solution for conducting and settling international trade transactions. This paper analyzes the reviews of TradeCard by Electronic Message and the various problems which come to application of TradeCard, with particular attention to existing international frameworks for Payment systems based on Documentary Credit.ry Credit.

• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.39
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• pp.143-175
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• 2008

The documentary letter of credit is the most preferred and frequently used method in International Payment System in Korea, as it has less possibility of occurring credit risks in export than any other payment system. That's because the exporter can get payment from the issuing bank(confirming bank) by delivering the goods and presenting documents following the required procedure under the letter of credit, as the payment is affirmed by the issuing bank(including the confirming bank in case of the confirmed letter of credit) regardless of the buyer's payment. However, the pattern of payment methods used in international trade of Korea is changing dramatically like the importance of the credit is decreasing continuously among the payment methods while the remittance is increasing. The increase of remittance has a positive aspect that International Payment System are changing into those of advanced countries, but the decrease of the credit also has a negative aspect that the exporter might have a greater credit risks. Therefore, we need a systematic device to deal with this. Exporters in Korea usually have used the export credit insurance to deal with the credit risks However, the export credit insurance also have a limitation as the policy finance due to the limitation based on the credit status of the business and the limitation of acceptance from the lack of financial resources of the government, etc. Korea, which is the 11th export power in the world, has a basic limitation to deal with the credit risks by depending on the export credit insurance only. So, in this thesis, I have studied on the international factoring, forfaiting, which are advanced export finances and widely used in advanced countries, as substitutes to deal with the credit risks. the international factoring is an trade financing in which a factor offers full services such as credit cover, offering prepayment, collection, account receivables, management, etc, instead of the exporter on the account receivables occurred by the exporter's delivering goods to the importer. This international factoring has a high possibility of using as a means to deal with the credit risks, because it offers prepayment without recourse. the forfaiting is another export financing in which a forfaiter purchases the draft, the promissory note and other negotiable instruments issued from the international trade, with fixed interest rate without recourse from the exporter or previous holder. By using this method, they can avoid foreign exchange risks, contingency risks as well as credit risks, as the conveyances like the promissory note, etc are issued with the note warranty so-called 'per aval' in business practice. These trade financing are good substitutes to deal with the credit risks in export, but they are not widely used in Korea. Though it can be explained with various reasons, the common reasons are the lack of understanding on the use of advanced export finance, the lack of experts to manage the advanced trade finance, the conservative way of thinking of domestic organizations related to trade financing, the lack of organizations supporting the trade financing, etc.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.1241-1248
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• 2021

This study employs data from CRSP/Compustat files for the period from 2003 to 2017 and applies a panel data analysis. The results of this study show a positive relationship between trade credit and the firm's market value, however, the results show a negative relationship if we test the impact of financial credit on the firm's market value. The results have direct policy implications for investors, the firm's management, and financial strategy. An implication of our study is that using trade credit as a source of financing may give a positive signal of the firm's creditworthiness and increase the firm's market value. Also, the results of our study indicate that the benefits of using trade credit may outperform the cost of using it as a source of finance. Prior studies examine the impact of financial leverage on the firm's value, however, this study contributes to the existing studies that examine the factors that affect the firm's market value by examining the impact of using trade credit finance on the firm's market value. The main limitation of this study is that the results are based on listed firms, using data from unlisted firms is not available.

• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.14
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• pp.237-256
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• 2000

Electronic commerce has been threatening to address the transaction inefficiencies in international trade that is conducted through letters of credit(L/Cs) and other forms of traditional paper-based financial instruments. The replacement of traditional paper documets with electronic alternatives is becoming more of a relity within a number of business sectors. The conceptual model of electronic L/Cs presented in this paper is intended to provide a framework for discussing the development of a paperless credit. The TradeCard network provides a business-to-business e-commerce infrastructure that enables buyers and sellers to conduct and settle international trade transactions securely over the Internet. Sellers and Buyers should select the best payment methods of traditional L/Cs, electronic L/Cs, TradeCard, Bank Credit Card etc. in consideration of their business circumstances.

• Korea Trade Review
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• v.48 no.3
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• pp.23-41
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• 2023

The seller and the buyer write down the agreed details in the trade contract as trade contract clauses. In the case where a letter of credit is agreed to be the payment condition, the buyer shall open a letter of credit to the seller with the shipping date specified in the trade contract through its bank. In this case, the legal relationship between the performance date of the trade contract and the shipment date of the letter of credit, the change of the performance date of the trade contract due to the change of the trade contract and the change of the shipment date specified in the letter of credit, the seller's letter of credit A problem arises in the legal interpretation of the approval period and the change request period. Therefore, this paper analyzed the precedents of the Seongnam Branch of the Suwon District Court and the Seoul High Court related to these legal issues. The performance date of a trade contract is the seller's delivery date and the buyer's payment date. In the letter of credit transaction, the date of performance of the trade contract is regarded as the date of shipment and the date of negotiation of documents specified in the letter of credit. The seller must decide whether to accept the letter of credit within 5 banking days after receiving the letter of credit from the buyer. After this period has elapsed, the seller cannot refuse the letter of credit. However, if the buyer is unable to decide whether to accept the letter of credit within 5 banking days due to reasons attributable to the buyer, the delivery date specified in the letter of credit will be extended. If the seller requests an amendment to the letter of credit, the buyer must accept it and open the letter of credit the seller desires to the seller. If the buyer refuses the seller's request to change the letter of credit, company A has the obligation to change and reopen the letter of credit as requested by company B. Expect by agreeing on the quotation As it is a fundamental breach of contract stipulated in Article 25 of the United Nations Convention on Contracts for the International Sale of Goods, company B can cancel the trade contract and claim damages from company A. Compensation for damages caused by Company A's breach of the trade contract shall be an amount equal to the loss suffered by Company B as a result of the breach, including loss of profits.

• International Journal of Advanced Culture Technology
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• v.9 no.3
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• pp.271-276
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• 2021

In this paper we analyze the effect of the credit period on inventory policy under trade credit with ordering cost including a fixed cost and freight cost, where the freight cost has a quantity discount. For marketing purposes, some supplier offers credit period to his buyer to stimulate the demand for the product he produces. The delay in payments during the credit period has the effect of reducing the buyer's capital opportunity cost. It is also assumed that the buyer pays the freight cost for the order and hence, the ordering cost consists of a fixed ordering cost and a variable freight cost which depends on the order quantity. As a result, the possibilities of trade credit and discounts on freight costs are expected to play an important role in the buyer's inventory policy. Based on the economic order quantity inventory model, we analyze how the buyer can determine the optimal inventory policy and we examine the effect of the length of credit period on the buyer's inventory policy.

• The Journal of the Korea Contents Association
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• v.10 no.2
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• pp.361-371
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• 2010

This paper analyses the information contents of the trade credit in Korea. Trade credit is not only a settlement device in business cycle but also an information messenger in the financial market with an asymmetric information. The empirical results support that in addition to the bank loan, trade credit takes a significant role in that it provide a cheap and reliable credit to firms that have financial difficulties because of the information problem.