Legal Solvency Tests and Financial Economics
J.B. HEATON
(Attorney with Bartlit Beck Herman Palenchar & Scott in Chicago and an adjunct associate professor of finance at Duke University Fuqua School of Business and Duke Global Capital Markets Center. He is also the law and finance contributing editor of The Journal of Risk Finance. jb.heaton@bartlit‐beck.com)
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Abstract
Legal solvency tests play a crucial role in high‐stakes financial transactions. This article presents a brief introduction to legal solvency tests that play important roles in bankruptcy and corporate law. The author then proceeds to analyze these tests from the perspective of financial economics, and argues that optimal solvency tests should be context‐dependent.
Citation
HEATON, J.B. (2002), "Legal Solvency Tests and Financial Economics", Journal of Risk Finance, Vol. 4 No. 1, pp. 57-62. https://doi.org/10.1108/eb022955
Publisher
:MCB UP Ltd
Copyright © 2002, MCB UP Limited