Do national differences in social capital and corporate ethical behaviour perceptions influence the use of collateral? Cross-country evidence

We study the impact of social capital and perceptions about corporate ethical behaviour on the use of collateral in corporate borrowing. Using a dataset of more than 17,500 firms operating in over 100 transition and developing countries, we find evidence that country-level social capital and better perceptions about corporate ethical behaviour are negatively associated with the likelihood to pledge collateral. In addition, these country level characteristics influence the value of collateral relative to the loan value.