Open AccessThe Determinants of Export Documentary Credit in Lebanon
Author(s) -
Samih Antoine Azar
Publication year - 2017
Publication title -
accounting and finance research
Language(s) - English
Resource type - Journals
eISSN - 1927-5994
pISSN - 1927-5986
DOI - 10.5430/afr.v6n1p68
Subject(s) - collateral , documentary evidence , value (mathematics) , credit card interest , letter of credit , credit history , economics , business , monetary economics , credit reference , financial system , finance , credit risk , law , commercial bank , machine learning , political science , computer science
The empirical literature on documentary credit is notoriously lacking. The main reason is the absence of clean statistics. Lebanon is an exception. Documentary credit can be either for import or for export purposes. This paper dwells on export documentary credit. The determinants of such credit can be classified into factors that are derived from the demand for exports, and additional unique factors. The derived factors are foreign demand, and the value of the exchange rate. The unique factors are borrowing costs and business and consumer confidence. Three types of export documentary credit have available data series: opened, utilized, and outstanding. The decision to open depends on all four factors. When the credit is utilized the collateral loans are repaid. Hence borrowing costs should not matter. The other three factors remain statistically significant. Outstanding documentary credit depends solely and surprisingly on foreign demand.