Competition of the mechanisms : how Chinese home appliance firms coped with default risk of trade credit?
AbstractDuring the transition period from a planned economy to a market economy in 1990s of China, there was a considerable accrual of deferred payment, and default due to inferior enforcement institutions. This is a very common phenomenon in the transition economies at that time. Interviews with home electronics appliance firms revealed that firms coped with this problem by adjusting their sales mechanisms (found four types), and the benefit of institutions was limited. A theoretical analysis claim that spot and integration are inferior to contracts, a contract with a rebate on volume and prepayment against an exclusive agent can realize the lowest cost and price. The empirical part showed that mechanisms converged into a mechanism with the rebate on volume an against exclusive agent and its price level is the lowest. The competition is the driving force of the convergence of mechanisms and improvement risk management capacity.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 312.
Date of creation: Dec 2011
Date of revision:
Publication status: Published in IDE Discussion Paper. No. 312. 2011.12
Postal: Publication Office, IDE 3-2-2 Wakaba, Mihama-ku, Chiba-shi, Chiba 261-8545 JAPAN
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Raymond Fisman & Inessa Love, 2002.
"Trade Credit, Financial Intermediary Development and Industry Growth,"
NBER Working Papers
8960, National Bureau of Economic Research, Inc.
- Raymond Fisman & Inessa Love, 2003. "Trade Credit, Financial Intermediary Development, and Industry Growth," Journal of Finance, American Finance Association, vol. 58(1), pages 353-374, 02.
- Fisman, Raymond & Love, Inessa, 2001. "Trade credit, financial intermediary development, and industry growth," Policy Research Working Paper Series 2695, The World Bank.
- Elhanan Helpman, 2006.
"Trade, FDI, and the Organization of Firms,"
NBER Working Papers
12091, National Bureau of Economic Research, Inc.
- Helpman, Elhanan, 2006. "Trade, FDI and the Organization of Firms," CEPR Discussion Papers 5589, C.E.P.R. Discussion Papers.
- Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
- Michaela Draganska & Daniel Klapper & Sofia B. Villas-Boas, 2010.
"A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel,"
INFORMS, vol. 29(1), pages 57-74, 01-02.
- Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B., 2008. "A larger slice or a larger pie? : an empirical investigation of bargaining power in the distribution channel," CUDARE Working Paper Series 1046, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B, 2008. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7v13q46w, Department of Agricultural & Resource Economics, UC Berkeley.
- Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B., 2008. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Research Papers 2001, Stanford University, Graduate School of Business.
- John McMillan & Drucilla Ekwurzel, 2001. "Economics Online," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 7-10, March.
- Chee K. Ng & Janet Kiholm Smith & Richard L. Smith, 1999. "Evidence on the Determinants of Credit Terms Used in Interfirm Trade," Journal of Finance, American Finance Association, vol. 54(3), pages 1109-1129, 06.
- Eric Rasmusen, 2006. "The BLP Method of Demand Curve Estimation in Industrial Organization," Working Papers 2006-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Kyle Hyndman & Giovanni Serio, 2007.
"Competition and Inter-Firm Credit: Theory and Evidence from Firm-level Data in Indonesia,"
Departmental Working Papers
0702, Southern Methodist University, Department of Economics.
- Hyndman, Kyle & Serio, Giovanni, 2010. "Competition and inter-firm credit: Theory and evidence from firm-level data in Indonesia," Journal of Development Economics, Elsevier, vol. 93(1), pages 88-108, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie Kobayashi).
If references are entirely missing, you can add them using this form.