The concept of business insolvency varies from one country to another, making it hard to give international comparisons. The disparities between countries are for two main reasons.
First, official insolvency procedures are not of equal importance everywhere.
In some countries, amicable arrangements predominate (for example, in Spain and Italy), and the ﬁgures for company insolvencies are quite low, thus understating the real picture for business insolvencies.
Second, in some cases, individual entrepreneurs are included in the ﬁgures for business insolvencies.
In other cases, however, they are included in the ﬁgures for personal bankruptcies (for example, in the U.S.), with no distinguishing between purely personal bankruptcies and sole trader bankruptcies. In the latter cases, the number of business insolvencies is signiﬁcantly understated.
Besides this, for each country we use the deﬁnition of a business that is used in its insolvency demographics for calculating an insolvency rate. Thus, the number of businesses used for the U.S. represents solely companies, and does not take into account individual entrepreneurs, estimated to total around 17 million.
However, for most countries, the number of businesses and the number of insolvencies include the ﬁgures for individual entrepreneurs.
To overcome the heterogeneous nature of national statistics and circumstances,
we employ the change in insolvencies over time rather than their absolute
numbers. For each country, we have calculated an insolvency index, using a basis of 2000=100.
We have then constructed our Global Insolvency Index (GII), which is the weighted sum of the national indices. Each country is weighted according to its share of the total GDP (at current exchange rates) of the countries included in our study.