METHODOLOGICAL APPROACHES TO DETERMINING THE ECONOMIC EFFICIENCY OF INSOLVENCY LAW

Abstract

Insolvency law is an essential part of the legal system in any country. It serves a dual function – restoring the solvency of debtors and removing inefficient economic entities from the market. The effectiveness of insolvency law has a direct impact on a country's investment attractiveness and economic growth. This is why international economic organizations conduct assessments of national insolvency mechanisms using various approaches to define and evaluate effectiveness criteria. Despite the existence of an insolvency indicator developed by the Organization for Economic Cooperation and Development (OECD), the international Doing Business ranking by the World Bank became a catalyst for bankruptcy legislation reform in Ukraine in 2021. It is worth noting that each approach to evaluating the effectiveness of this area of law has its advantages and disadvantages in terms of accuracy and objectivity. The final assessments may be distorted due to biases of the compilers, which led to the cancellation of the Doing Business ranking in 2021. For Ukraine, the assessment of the effectiveness of insolvency legislation is crucial, given the importance of this institution in ensuring economic efficiency during both wartime and peacetime. It helps identify directions for improving legal regulation, including aligning Ukrainian legislation with European Union standards. This highlights the need to develop specific criteria for evaluating the practicality of legislative changes to enhance the efficiency when applied to all participants in the insolvency or bankruptcy proceedings. It should stimulate economic growth and harmonize Ukrainian legislation with European Union standards. This research analyzes various aspects of the effectiveness of insolvency legal mechanisms in Ukraine using the methodology of economic analysis of law, which has received insufficient attention in empirical studies and legislative work in Ukraine until now. The research findings will be a significant contribution to promoting effective regulation of debtor solvency restoration and preventing bankruptcy. They will also stimulate economic growth and harmonize Ukrainian legislation with European Union standards. Through the lens of interdisciplinary approaches to evaluating the effectiveness of insolvency law in Ukraine, the study proposes seven indicators for determining the economic efficiency of Ukrainian insolvency law: 1) Funds Recovery Ratio; 2) Case Processing Time; 3) Solvency Restoration Index; 4) Bankruptcy (Insolvency) Case Quantity Dynamics Index; 5) Business Climate Index; 6) Insolvency Policy Index for SMEs; 7) Legal Application Predictability Index. The proposed methodological approach allows for the assessment of the result of the formation and implementation of the state insolvency policy.