An Empirical Study To Investigate Choice Of Payment Term In Foreign Trade Transactions And Its Causes With Respect To The Location Of Trade

Abstract

The concept of payment constitutes the most significant issue essential to the progress of foreign trade. The reasons why particular payment terms are preferred and used with respect to the countries, regions or continents involved differ due to differences in such dynamics as relevant laws and regulations, procedures, economic and political conditions of the location of trade, and so on. In this paper, both firms’ choice on payment term to use in foreign trade and the causes shaping this choice have been investigated through a questionnaire study. In this context, the questionnaire data were collected via some interviews with the representatives of 42 corporations located in Bursa, the second city of Turkey in terms of foreign trade performance, which are engaged in foreign trade. The empirical findings suggest statistically significant relationships between the choice of payment term and the type of sector in which the firm operates.