For many years, the OECD has developed and up-dated an economy-wide indicator of regulatory barriers to firm entry and competition, measuring the stance of product market regulation in an internationally comparable way (Koske et al., 2015). However, a similar indicator of regulatory barriers to firm exit has been lacking. Filling the gap, this chapter presents the new cross-country policy indicators of insolvency regimes for 36 countries, based on countries’ responses to a recent OECD questionnaire (Adalet McGowan and Andrews, 2018).
The new OECD indicators cover policies which – based on international experience and research – may carry adverse consequences for productivity growth by delaying the initiation and increasing the length of insolvency proceedings. They have been constructed on the assumption that the inefficiencies on the exit margin are likely to be more pronounced in economies where insolvency regimes impose a high personal cost to failed entrepreneurs or lack sufficient preventative and streamlining measures and tools to facilitate restructuring. They also cover other features that may delay the timely resolution of financial distress, such as the role of courts, employee rights and the treatment of fraudulent activities.