Factors affecting companies' insolvency in developed countries

This paper concerns the potential relationship between both costs of insolvency proceedings and yields from such proceedings for creditors, and the performance of a given economy (measured by GDP per capita).  The authors proceed from the hypothesis that the amount of costs and yields in insolvency proceedings should be dependent on the extent of development of a given country, and that the degree of economic development can be measured precisely by GDP per capita. This hypothesis can be proved by using mathematical models, whilst several further findings of lesser significance were a by-product of the research. 

We can form several conclusions on the basis of the regression analyses

recovery rate = a + b1 x COST + b2 x GDP + e

into which data on insolvency processes provided by Doing Business were entered on the one hand, and statistical data on the level of GDP at current market prices per head of population on the other.

The first of these is the assertion that it was possible to confirm the hypothesis according to which the efficiency of insolvency processes is higher in countries which demonstrate a generally higher productivity for the national economy expressed precisely by the data on GDP at current market prices per head of population. These countries reach a lower level of costs and at the same time, higher satisfaction for creditors.

The second conclusion is that for all monitored cases of individual OECD countries, higher costs for proceedings lead to a reduction of yields for creditors. If we reverse this relationship, we can assert that higher expenses for the insolvency process do not lead to an increase in the quality of insolvency proceedings – at least not in the sense that this would result in higher efficiency of proceedings expressed by a higher yield.