of the shocks could be on the real economy. _Ceteris paribus_ , when φ is larger, borrowing constraints are less likely to bind, and crises are less frequent. Without an empirical measurement of φ, the theoretical literature must resort to calibrating φ to match some business cycle moments. Thus, the value of φ is modelspecific, and not surprisingly, it varies markedly across studies (for example 15%-30% in Mendoza (2010), 5% in Korinek and Jeanne (2010), 32% in Bianchi (2011), 50% in Devereux and Yetman (2010)). An estimate of φ will provide the literature an empirical measure to serve as a benchmark value. More broadly, documenting and understanding the magnitude and the correlates of collateral’s extensive and intensive margins are crucial for both firms and governments to mitigate the negative aspects of collateralized borrowing.

Our paper is an attempt to fill the gap and it is divided into two parts. In the first part, we use data from 22,263 borrowing firms,<sup>3</sup> across 131 countries, and between 2005-2017 from World Bank’s Enterprise Surveys (WBES) to document the existence and prevalence of collateralized borrowing. We show that collateralized borrowing is widespread. On average, 77% of loans from financial institutions require collateral, and among loans with collateral, collateral value is about 167% of the loan value. This implies that for a $1 loan, the average collateral value is $1.67. Equivalently, the loan-to-value ratio φ is about 60%. When stocks, bonds and other financial assets are pledged as collateral, the collateral value is about 120% of the loan value. This implies that the value of φ is 83%. Either at 60% or 83%, the value is much larger than those commonly used in the theoretical literature. Our empirical estimate of φ has been cited and used in recent theoretical literature on macro-prudential policy, for example, by Bianchi and Mendoza (2017).

In the second part of this paper, we run cross-section regressions to find associations between firm characteristics, bank characteristics and loan characteristics with collateral requirements. We focus on two questions: (1) whether an existing loan requires collateral (i.e. the extensive margin), and (2) when the loan does require collateral, what is the collateral value relative to the loan value (i.e. the intensive margin)?

On the extensive margin, we find that foreign firms are less likely to pledge collateral when they borrow. This result is not new. Berger and Udel (1995) with U.S. data and Jimenez et al (2006) with Spanish data have similarly found that loans to low-risk borrowers are less likely to be collateralized.

What is new and more interesting is that small firms are found to be significantly less likely to pledge collateral compared to medium and large firms. Loans from non-bank financial institutions are also more associated with no collateral. These two results are related, because small firms are significantly more

> 3 Among 43,879 firms that provided valid answers to whether collateral was required, 22,263 firms have approval of loans within three years of the interview. These 22,263 firms form the sample for us to analyze the likelihood of collateral requirement.

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