Culture and collateral requirements: Evidence from developing countries

Giota Papadimitri (), Fotios Pasiouras and Menelaos Tasiou

No 2019-04, Working Papers in Economics & Finance from University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group

Abstract: We study the relationship between culture and the use of collateral in corporate borrow- ing. Using a dataset of over 14,000 firms from 70 transition and developing countries, we find evidence that the likelihood to pledge collateral is lower in countries with higher un- certainty avoidance and corporate ethical behavior. In contrast, long-term orientation and individualism enhance the likelihood to use collateral. These results hold when using sub- samples and further controls for various firm and country-specific attributes. Additional analysis reveals that culture influences not only the likelihood to pledge collateral but also its type (movable versus non-movable) and its value relative to the value of the loan.

Keywords: Culture; Ethics; Collateral (search for similar items in EconPapers)
JEL-codes: G21 G32 G41 (search for similar items in EconPapers)
Pages: 27
Date: 2019-01-09
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-dev and nep-soc
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