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Does the choice in valuation method matter in the judicial appraisal of private firms?

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  • Jani Saastamoinen
  • Hanna Savolainen

Abstract

This paper investigates empirical relations between the redemption values of minority shares and valuation methods used by dissenting parties in the judicial valuation of private firms. We examine a comprehensive data set of Finnish judicial appraisal cases in which the judge decides the valuation of the minority stake in a private firm after learning the valuation estimates put forward by the controlling shareholder(s) and the minority shareholder(s). Rationality in valuation will be achieved if a valuation estimate incorporates all the available information regardless of the valuation method adopted. Conversely, the measurement perspective argues that biases inherent in valuation approaches determine the information content in a valuation estimate. Our statistical analyses suggest that the choices made concerning the valuation method are statistically correlated with the appraisal outcomes. We interpret this as evidence consistent with the measurement perspective.

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  • Jani Saastamoinen & Hanna Savolainen, 2019. "Does the choice in valuation method matter in the judicial appraisal of private firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 46(1-2), pages 183-199, January.
    • Handle: RePEc:bla:jbfnac:v:46:y:2019:i:1-2:p:183-199
    DOI: 10.1111/jbfa.12364
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    1. Jani Saastamoinen & Hanna Savolainen, 2021. "Does a leopard change its spots? Auditors and lawyers as valuation experts for minority shareholders in the judicial appraisal of private firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 613-636, March.

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