Who Uses Trade Finance? Case-Based Evidence from Italian Exporters

Our study aims to investigate the characteristics of those export-oriented firms that are more inclined to borrow capital or receive payments via use of trade finance (TF) products so as to boost their international trade activities and expand globally being exposed to a minimum counterparty risk. In this sense, this article seeks to provide additional empirical evidence enlightening the mechanics of the commercial bank-(corporate) customer relationship in the international trade financing context characterized by shortage of data and business practice opacity. Relying on the fact that only banks collect data on their own TF transactions for internal reporting purposes, we had the opportunity to access the proprietary information on export lending conducted by Crédit Agricole with 155 corporate customers in 2015. This enabled us to collect a case study-based set of TF transactions. Our study challenges extant research by adding novel empirical evidence on how TF works so as to address the issue of the dearth of data that limits empirical efforts in this area. The contribution of our research is threefold. First, we advance the knowledge of Italy considered as an interesting country case study in the international trade area due to its characteristics of an export-oriented and bank-driven economy. Second, we investigate the characteristics of those firms that are more in need and thus organized to obtain bank-intermediated export finance to successfully pursue their international expansion strategies. Third, we provide guidelines to bank managers on how to set the main terms of TF products for corporate clients by drawing upon a better understanding of the latter’s features. This may improve the way relationship lending is conducted in the international commercial banking business. In this vein, our study expands the body of research on relationship banking.