Trade Credits under Imperfect Enforcement: A Theory with a Test on Chinese Experience

It is widely recognized that trade credit is an important financial mechanism, particularly in developing economies and transition economies where institutions are weak. This paper documents theoretical analysis and empirical accounts on what facilitates an effective supply of trade credit based on original surveys conducted in P.R. of China. Our theory predicts that trade volume and trade credit are increasing function of cash held by the buyer and enforcement technology of the seller. Furthermore, if the state sector’s enforcement technology is high, it has positive external effect to expand the volumes of trade credit and trades in the whole economy. From the data, we found that government made active commitment in enforcement of trade credit contract and the government owned firms are main supplier and receivers of trade credit, which suggest that enforcement by government and state sector were effective against presumptions in the previous literatures.Law and finance, Economic growth, Incomplete contract, Enforcement, Trade policy, Credit, China

Contributions of mutations in acrR and marR genes to organic solvent tolerance in Escherichia coli

The AcrAB-TolC efflux pump is involved in maintaining intrinsic organic solvent tolerance in Escherichia coli. Mutations in regulatory genes such as marR, soxR, and acrR are known to increase the expression level of the AcrAB-TolC pump. To identify these mutations in organic solvent tolerant E. coli, eight cyclohexane-tolerant E. coli JA300 mutants were isolated and examined by DNA sequencing for mutations in marR, soxR, and acrR. Every mutant carried a mutation in either marR or acrR. Among all mutants, strain CH7 carrying a nonsense mutation in marR (named marR109) and an insertion of IS5 in acrR, exhibited the highest organic solvent-tolerance levels. To clarify the involvement of these mutations in improving organic solvent tolerance, they were introduced into the E. coli JA300 chromosome by site-directed mutagenesis using λ red-mediated homologous recombination. Consequently, JA300 mutants carrying acrR::IS5, marR109, or both were constructed and named JA300 acrRIS, JA300 marR, or JA300 acrRIS marR, respectively. The organic solvent tolerance levels of these mutants were increased in the following order: JA300 < JA300 acrRIS < JA300 marR < JA300 acrRIS marR. JA300 acrRIS marR formed colonies on an agar plate overlaid with cyclohexane and p-xylene (6:4 vol/vol mixture). The organic solvent-tolerance level and AcrAB-TolC efflux pump-expression level in JA300 acrRIS marR were similar to those in CH7. Thus, it was shown that the synergistic effects of mutations in only two regulatory genes, acrR and marR, can significantly increase organic solvent tolerance in E. coli

Ex ante bargaining and ex post enforcement in trade credit supply: theory and evidence from China

If payment of goods is easily default, economic transaction may deeply suffer from the risk. This risky environment formed a mechanism that governs how economic transaction is realized, subsequently how trade credit is given. This paper distinguished ex ante bargaining and ex post enforcement, then modeled that bargaining power reduces trade credit ex ante, and ex post enforcement power and cash in hand of buyer can enhances both trade amount and trade credit in a presence of default risk. We modeled this relationship in order to organize findings from previous literature and from our original micro data on detailed transaction in China to consistently understand the mechanism governing trade credit. Then empirically tested a structure from the theoretical prediction with data. Results show that ex post enforcement power of seller mainly determines size of trade credit and trade amount, cash in hand of buyer can substitute with enforcement power; Bargaining power of seller is exercised to reduces trade credit and trade amount for avoiding default risk, but it simultaneously improves enforcement power as well. We found that ex post enforcement power consists of (ex ante) bargaining power on between two parties and intervention from the third party. However, its magnitude is far smaller than the direct impact to reduce trade credit and trade amount

Trade Credits under Imperfect Enforcement: A Theory with a Test on Chinese Experience

It is widely recognized that trade credit is an important financial mechanism, particularly in developing economies and transition economies where institutions are weak. This paper documents theoretical analysis and empirical accounts on what facilitates an effective supply of trade credit based on original surveys conducted in P.R. of China. Our theory predicts that trade volume and trade credit are increasing function of cash held by the buyer and enforcement technology of the seller. Furthermore, if the state sector’s enforcement technology is high, it has positive external effect to expand the volumes of trade credit and trades in the whole economy. From the data, we found that government made active commitment in enforcement of trade credit contract and the government owned firms are main supplier and receivers of trade credit, which suggest that enforcement by government and state sector were effective against presumptions in the previous literatures

Financial Aspects of Transactions with FDI: Trade Credit Provision by SMEs in China

This paper will document financial aspects of transactions, and trade credit supply behavior with FDI among small and medium-sized enterprises(SMEs) based on two original surveys, conducted in four cities in China in 2003. The survey was designed to capture the nature of inter-firm transactions, trade credit and other financial conditions. Literature on FDI mainly refers to technology transfer, employment or investment. This paper focuses on the role and significance of FDI in the supply of trade credit due to its trade credit enforcement technology.Yanagawa, Ito and Watanabe [2006] developed a model which indicates that when a seller has higher enforcement technology or a buyer has richer liquidity, both trade credit and transaction volume will be increased. In this paper, we confirmed that FDI and G contributed to the provision of trade credit and had a positive external effect on trade credit enforcement towards China’s economy. (1) Sales towards FDI customers have the power to increase the trade credit ratio,even when controlling other factors such as choice of payment instrument, competitiveness, and expost default management. This implies that FDI does provide trade credit, not only because it has superior liquidity, but because it is also superior in terms of enforcement of trade credit repayment.(2) Cash constraints of the buyer influence the decisions concerning trade credit provided by the seller, as a model in Yanagawa, et al. [2006] predicted, and this implies that strategic default is a serious concern among SMEs in China. (3) Spillover effect exists in payment enforcement technology in transactions with FDI customers

Enforceability in Trade Credit: Financial Aspects of Transactions with FDI

This paper documents financial aspects of transactions and trade credit supply behavior with foreign direct investment (FDI) among small- and medium-sized enterprises, based on two original surveys. The surveys, conducted in four cities in China in 2003, were designed to uncover the nature of inter-firm transactions, trade credit and other financial conditions. Literature on FDI mainly refers to technology transfer, employment, or investment. This paper focuses on the role/significance of FDI in the supply of trade credit due to its enforcement technology of trade credit. Yanagawa, Ito, and Watanabe (2006) developed an incomplete contract model wherein when the seller has a higher enforcement technology or the buyer has richer liquidity, both trade credit and transaction volume will increase. In this paper we first compute the "enforcement probability" of each seller then test the propositions of the model. We confirm that (1) FDI and G firms provide larger trade credit. (2) This is due to their higher enforcement probability in trade credit. Furthermore, (3) higher enforcement probability has a positive external effect in enhancing the trade credit and transaction volume of indirect transaction partners. However, we also find that (4) in order to raise the probability of "no default," enhancing the ratio of cash on delivery is a necessary measure. (5) A more competitive supplier will prefer cash on delivery payment and consequently will provide less trade credit to the economy. (6) With a shorter transaction period, the supplier will provide larger trade credit. This implies that firms with a stronger bargaining power prefer providing no trade credit though they can expect higher enforcement probability, thus reduces the volume of economic activity. These negative forces against enhancing trade credit and economic activity exist at a substantial level in China. Because of this force, a strategic default problem persists in China even 30 years after the transition began.

(2,7-Dimeth­oxy­naphthalen-1-yl)(4-fluoro­phen­yl)methanone

In the title compound, C19H15FO3, the dihedral angle between the naphthalene ring system and the benzene ring is 80.46 (4)°. In the crystal, mol­ecules are linked by inter­molecular C—H⋯O hydrogen bonds into chains parallel to the b axis

2-(2,7-Dimeth­oxy-1-naphtho­yl)benzoic acid

In the title compound, C20H16O5, the dihedral angle between the naphthalene ring system and the benzene ring is 67.43 (5)°. The bridging carbonyl C—C(=O)—C plane makes dihedral angles of 82.64 (6) and 41.79 (7)°, respectively, with the naphthalene ring system and the benzene ring. The dihedral angle between the carb­oxy O—C(=O)—C plane and the benzene ring is 36.38 (7)° and that between the bridging carbonyl C—C(=O)—C plane and the carb­oxy O—C(=O)—C plane is 51.88 (8)°. The crystal structure is stabilized by inter­molecular O—H⋯O and C—H⋯O hydrogen-bonding inter­actions. An intra­molecular C—H⋯O hydrogen bond occurs between a naphthalene H atom and the carbonyl O atom of the carb­oxy group