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Design of insolvency regimes across countries

Author

Listed:
  • Müge Adalet McGowan
  • Dan Andrews
Abstract
This paper explores cross-country differences in the design of insolvency regimes, based on quantitative indicators constructed from countries’ responses to a recent OECD policy questionnaire. The indicators – which are available for 36 countries for 2010 and 2016 – aim to better capture the key design features of insolvency which impact the timely initiation and resolution of personal and corporate insolvency proceedings. According to these metrics, the design of insolvency regimes varies significantly across countries, with important differences emerging with respect to the treatment of failed entrepreneurs, the availability of preventative and streamlining tools and ease of corporate restructuring. While a comparison of indicator values for 2010 and 2016 imply that recent reform efforts have improved policy design, there remains much scope to reform insolvency regimes in many OECD countries. This is particularly significant in light of complementary analysis which shows that the design of insolvency regimes is relevant for understanding three inter-related sources of contemporary labour productivity weakness: the survival of “zombie” firms, capital misallocation and stalling technological diffusion.

Suggested Citation

  • Müge Adalet McGowan & Dan Andrews, 2018. "Design of insolvency regimes across countries," OECD Economics Department Working Papers 1504, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1504-en
    DOI: 10.1787/d44dc56f-en
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    Citations

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    Cited by:

    1. Dan Andrews & Filippos Petroulakis, 2017. "Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe," OECD Economics Department Working Papers 1433, OECD Publishing.
    2. Lara Wemans & Manuel Coutinho Pereira, 2022. "Characteristics of parties and duration of insolvency cases in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    3. Epaulard, Anne & Zapha, Chloé, 2022. "Bankruptcy costs and the design of preventive restructuring procedures," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 229-250.
    4. Consolo, Agostino & Malfa, Federica & Pierluigi, Beatrice, 2018. "Insolvency frameworks and private debt: an empirical investigation," Working Paper Series 2189, European Central Bank.
    5. Dan Andrews & Müge Adalet McGowan & Valentine Millot, 2017. "Confronting the zombies: Policies for productivity revival," OECD Economic Policy Papers 21, OECD Publishing.
    6. Nieto-Carrillo, Ernesto & Carreira, Carlos & Teixeira, Paulino, 2022. "Giving zombie firms a second chance: An assessment of the reform of the Portuguese insolvency framework," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 156-181.
    7. Kliatskova, Tatsiana & Savatier, Loïc Baptiste & Schmidt, Michael, 2023. "Insolvency regimes and cross-border investment decisions," Journal of International Money and Finance, Elsevier, vol. 131(C).
    8. Ricardo Pinheiro Alves & Nuno Tavares & Gabriel Osório de Barros, 2023. "Revisitar as Empresas Zombie em Portugal (2008-2021)," GEE Papers 178, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Oct 2023.
    9. Nicola Comincioli & Sergio Vergalli & Paolo Panteghini, 2019. "Business tax policy under default risk," CESifo Working Paper Series 7664, CESifo.
    10. Müge Adalet McGowan & Dan Andrews & Valentine Millot, 2017. "Insolvency Regimes, Technology Diffusion and Productivity Growth: Evidence from Firms in OECD Countries," OECD Economics Department Working Papers 1425, OECD Publishing.
    11. Maximilian Gobel & Nuno Tavares, 2022. "Zombie-Lending in the United States -- Prevalence versus Relevance," Papers 2201.10524, arXiv.org, revised Jul 2022.
    12. Müge Adalet McGowan & Dan Andrews & Valentine Millot, 2017. "Insolvency regimes, zombie firms and capital reallocation," OECD Economics Department Working Papers 1399, OECD Publishing.
    13. Ionel Didea & Diana Maria Ilie, 2019. "(R)evolution of the insolvency law in a globalized economy," Juridical Tribune - Review of Comparative and International Law, Bucharest Academy of Economic Studies, vol. 9(1), pages 91-112, March.
    14. Redha Fares, 2022. "Bankruptcy, Performance and Market Selection: Evidence from Firms in France," Erudite Ph.D Dissertations, Erudite, number ph22-01 edited by Claude Mathieu.
    15. Moritz Schularick, 2021. "Corporate indebtedness and macroeconomic stabilisation from a long-term perspective," ECONtribute Policy Brief Series 024, University of Bonn and University of Cologne, Germany.

    More about this item

    Keywords

    capital misallocation; firm exit; personal and corporate insolvency; productivity; zombie firms;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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