Date of Award
Doctor of Philosophy (PhD)
Chair and Committee
Taylor Begley, Xing Huang, Yi Huang, Andreas Neuhierl,
This dissertation focuses on two main unanswered questions that lie at the intersection between international financing, international trade, and supply chains. Firstly, to what extent can international trade networks offer borrowing opportunities for firms that face significant barriers in traditional financing markets? Second, what are the potential impacts of financial globalization on firms’ borrowing and extension of trade credit?
The first chapter seeks to answer the first research question listed above: to what extentcan international trade networks offer borrowing opportunities for firms that face significant barriers in traditional financing markets? I show that firms use their trade flows to borrow cheaply from foreign credit markets in the form of both borrowing from financial institutions as well as via trade credit from their suppliers. Using a combination of firm-level financial and transaction-level import data, I find that firms execute carry trade strategies through both banking and trade credit channels, as exhibited by a significant increase in firm-level short-term borrowing when carry returns increase. These firms also increase their extension of trade credit to their customers during periods of high carry returns and tend to decrease their holdings of cash. I find significant cross-sectional variation in this carry trade activity depending on whether a firm is an active or inactive importer. Inactive importers tend to borrow more aggressively when carry returns are high, particularly via bank-intermediated trade financing channels. Active importers tend not to extend the proceeds of carry trades as trade credit to customers, preferring to hold the capital as cash, consistent with potential precautionary savings motives.
The second chapter is joint with Jing Wu and Jie Peng of The Chinese University of Hong Kong, and addresses the second research question: what are the potential impacts of financial globalization on firms’ borrowing and extension of trade credit? We explore this question using a proprietary dataset combining data on trade credit borrowing and lending activity with records of cross-border financing (CBF) activity from multiple data sources. The results suggest that firms which receive CBF tend to decrease demand and extension of trade credit. These effects are strongest for global bond issuances and global syndicated loan originations, and not significant for equity cross-listings. Finally, we find that a firm’s degree of centrality within its supply chain has a significant moderating effect on the trade credit response to a CBF event. More central firms tend to receive CBF with greater frequency and increase both trade credit demand and extension following such events when compared to non-central firms. The results suggest that central firms play important roles as liquidity providers within their supply chains, extending CBF flows to other firms in the form of trade credit.
Hsu, Jonathan Lennon, "Topics in International Finance" (2022). Olin Business School Electronic Theses and Dissertations. 2.