Methods of payment and foreign‐exchange risk management among firms in Brunei Darussalam

Abstract

Purpose – The purpose of this paper is to examine various methods of payment and foreign-exchange risk management among firms involved in either export or import trade only, or both in Brunei Darussalam. The paper also seeks to delineate the relationship(s) between various characteristics of firms such as number of years in business, size, and frequency of imports, and various methods of payment and foreign-exchange risk management by the firms. Design/methodology/approach – Judgment and snowball sampling methods are employed to collect data from the companies. The results are analyzed from a total sample of 42 responding firms. Descriptive statistics is used to present and analyze the data. Findings – The paper highlights the various important methods currently used for both payment, and foreign-exchange risk management in foreign trade by firms. It also mentions the methods that are used to lesser extent by importers and exporters in the country. Furthermore, various relationship(s) between either number of years in business, or size, or frequency of imports with various methods of payment, and foreign-exchange risk management among firms are also highlighted in the paper. Research limitations/implications – The results are basically from the various trading companies involved in foreign trade in Brunei Darussalam. Originality/value – This paper contributes to the existing literature of international business and finance. It fills the gap in the existing literature about current practices prevalent in the country. Furthermore, recommendations are made to enhance the methods of payment and foreign-exchange risk management practices among firms. The findings may also be useful for financial institutions interested in providing hedging products and services to the firms.