Market Evidence In Solvency Disputes — An Economist’s View

Courts often face many challenges when assessing the solvency of a company, whether public or privately held. Examples of difficult valuation questions include: Would a company with a market capitalization of several hundred million dollars possibly be insolvent? Or, would publicly traded debt at or near par be conclusive evidence that the issuer is solvent at the time? Or, would a company’s inability to raise funds or maintain its investment grade rating at a given time be sufficient to rule on solvency?

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