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...

Most high‐stakes litigation settles prior to the trial verdict being achieved. This apparent class action settlement pressure raises an interesting risk finance question addressed by the authors in this article. The article describes the basic law and economics of settlement risk within the...

Until recently, financial intermediaries have behaved as though immune from the bite of intellectual property law. However, recent decisions of the federal courts and acquiescence by Congress have created a new legal landscape. This article explores the basic principles and implications of...

We compare two competing theories of financial anomalies: "behavioral" theories built on investor irrationality, and "rational structural uncertainty" theories built on incomplete information about the structure of the economic environment. We find that although the theories relax opposite...

We test the limits of arbitrage argument for the survival of irrationality-induced financial anomalies by sorting securities on their individual residual variability as a proxy for idiosyncratic risk -- a commonly asserted limit to arbitrage -- and comparing the strength of anomalous returns in...