Trade credit in the rice market of the Mekong Delta, Vietnam

PhD ceremony: Ms. L.T.U. Nguyen, 13.15 uur, Academiegebouw, Broerstraat 5, Groningen

Title: Trade credit in the rice market of the Mekong Delta, Vietnam

Promotor(s): prof. B.W. Lensink, prof. C.L.M. Hermes

Faculty: Economics and Business

All over the world, firms provide trade credit to their trading partners. Whereas existing studies focus more on the use of trade credit in developed countries, this dissertation focuses on the role and determinants of trade credit supply in Vietnam, a transition economy. The thesis consists of four empirical studies, three of which are based on data from a large-scale survey covering information from over 600 firms active in the rice supply chain. The first study uses secondary data on Vietnamese listed firms, collected from publicly available sources. The analysis shows that firms that provide more credit manage to have higher rates of sales growth. The second study shows that rice supplying firms that face stronger competitive pressure of competition tend to grant more credit. This strategy is applied to strengthen their position vis-à-vis its competitors. We elaborate on these results in the third study and show that firms choose to supply more credit to larger and more established clients. These results support the idea that trade credit supply is used as a sales promoting tool. The fourth empirical analysis shows that characteristics of markets in the rice supply chain (competition between suppliers, bargaining power of suppliers vis-à-vis their clients, customer characteristics, main business activity, and value of transactions) differ considerably across different parts of the rice supply chain and influence the role and determinants of the supply of trade credit accordingly. The results of this final study suggest that specific market contexts should be taken into account when studying the role and determinants of trade credit.