Design of insolvency regimes across countries

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.