Research On The Selection Mechanism Of Export Settlement Methods Of Trade Company In The Perspective Of The Institutional Environment And Transaction History

With the deepening of the trend of global economic integration,the division of labor in international trade has become more specialized,and the middle part of trade has gradually been stripped off from manufacturing enterprises.Trade brokers act as intermediaries between importers and exporters,and they earn the difference of prices relying on information and capital advantages.In recent years,as the development of trade brokers continues to improve,the degree of service specialization has been raised and the development of China's trade has been promoted.The usual operation mode of foreign trade company is receiving the overseas order,finding the domestic suppliers to produce the goods,then exporting and earning the profit.To control the transaction risk,it is necessary to choose the right settlement method.Institutional environment and transaction history are two main factors influencing the selection of settlement method for the trade company.In international trade,the settlement method is one of the important clauses for trade companies to negotiate contracts with importers.In order to study the influence of the institutional environment and transaction history on the selection of settlement methods for trade companies,this paper discusses the selection mechanism of settlement methods by combining the theoretical and empirical methods.Above all,This paper draws on the partial equilibrium model of Antras and Foley(2015)to analyze how the institutionalenwironment and transaction history influence the choice of settlement methods of foreign trade companies under the constraint of profit maximization conditions.In the empirical analysis section,this paper uses data of nearly 70,000 export transactions in a representative trade company in Jiangsu Province from 1999 to 2011,adopts multinomial Logit and Probit model,and estimates the impact of the institutional environment and transaction history of the importers on the choice of export settlement method.This paper presents several hypotheses based on the model and empirical analysis.The main conclusions can be summarized as the following three points:(1)With the improvement of institutional environment of the importer country,trade companies prefer to use credit or collection,with the probability of prepaid and letter of credit declining;(2)Transaction history has a significant impact on the choice of settlement,and there is an intermediary effect.The increase in transaction history directly reduces the possibility of trade companies choosing to prepay,and this effect is more pronounced especially when the institutional environment in the import country is better.(3)When the trade company trades with the new importer for the first time,the selection mechanism of the settlement method will change,and it will be more inclined to choose the prepaid settlement method.During the economic crisis,the risk of default by importers increased.Trade companies were more cautious when choosing settlement methods,and the probabilities of using credit and collection decreased.The innovation of this paper is mainly reflected in the research and methods perspective.On the one hand,there are few empirical studies on the choice of settlement method in China,and most of them are based on the experience of qualitative description and practice.This paper introduces partial equilibrium model into the selection mechanism of settlement method,and analyzes the mechanism of environmental environment and transaction history on settlement method.At the same time,based on the transaction data of a representative trade company in Jiangsu Province,this paper validates several propositions drawn from the model and empirical analysis.On the other hand,this paper reveals a series of differences between China and the U.S.trade companies in the choice of settlement methods.Institutional environmental factor is an important factor that affects China's trade companies' choice between letter of credit or prepaid settlement method,while there is no significant impact on U.S.trades;the transaction history factor is a significant consideration of whether trade companies choose the L/C,but has no significant impact for the latter.