1. OECD INDICATORS OF
INSOLVENCY REGIMES
Müge Adalet McGowan
14 September 2017
Bankruptcy and Second Chance Policies
OECD, Paris
2. • Rationale: market imperfections prevent the
orderly exit of failing firms
• Goals: insolvency regimes can restructure
viable firms and liquidate non-viable ones
– In practice, correctly distinguishing between viable
and non-viable firms can be difficult.
• Trade-offs: insolvency regimes need to balance
providing incentives for experimentation by
entrepreneurs with lending by creditors.
Insolvency regimes: rationale, goals
and trade-offs
3. World Bank Doing Business:
• Only refer to corporate insolvency
• Outcome-based indicators: time and cost to close a business
– Based on a stylised case study: hotel as debtor, tangible
assets, only one creditor, focus on formal insolvency
proceedings
• Strength of insolvency framework
– Miss some of the policy design features relevant for
productivity
European Commission and Armour and Cumming (2008):
• Limited country and time coverage (recent insolvency
reforms)
Existing indicators of insolvency
regimes
4. • OECD questionnaire and indicators:
– Corporate and personal insolvency
– Based on international best practice and existing literature
– Different policy design features linked to inefficiencies on the exit
margin
– Increasing in the extent to which the insolvency regime delays
the initiation of and increases the length of insolvency
proceedings
• Limitations:
– Focus on ex-post efficiency incentives
– Addressing trade-offs
– Not capture quality of resolution and complementarities with
other policies (e.g. judicial efficiency)
Measurement of insolvency regimes
5. New cross-country indicators of
insolvency regimes
Equal weights assigned to each feature for the composite indicators
6. Cross-country differences in
insolvency regimes are significant
Composite indicators of insolvency regimes
0.0
0.2
0.4
0.6
0.8
GBR
JPN
DEU
PRT
RUS
ESP
USA
CHE
FRA
ISR
IRL
CRI
GRC
CHL
FIN
SVN
NZL
ITA
CZE
POL
MEX
LVA
AUT
NOR
SVK
TUR
SWE
LTU
AUS
CAN
BEL
NLD
HUN
EST
2016 2010
Source: Adalet McGowan, M., D. Andrews and V. Millot (2017), “Insolvency Regimes, Zombie Firms and Capital
Reallocation”, OECD Economics Department Working Paper, No.1399.
10. 10
Special procedures for SMEs
-1
0
1
CHE
CHL
ESP
FIN
FRA
GBR
IRL
ITA
KOR
LUX
SVK
SVN
USA
AUS
AUT
BEL
CAN
CHN
CRI
CZE
DEU
DNK
EST
GRC
HUN
ISR
JPN
LTU
LVA
MEX
NLD
NOR
NZL
POL
PRT
RUS
SWE
TUR