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The value of the freezeout option is critical in many legal policy issues concerning corporate law. In this article, we present, for the first time, a method for determining the value of the minority stock and the freezeout option. We price the freezeout option with two different sets of assumptions regarding the controlling shareholder informational advantage, using both an exogenous and endogenous stock prices in our pricing. The result of our model indicates that the freezeout option has a low value and the minority stock is only slightly discounted. This result implies that the use of publicly known information, including market prices, in determining a fair value for minority stocks will not cause expropriation of minority shareholders and will not lead to inefficiency in corporate and controlling owners’ decisions. Empirical studies support this view.

Significant computational simplification is achieved when option pricing is approached through the change of numeraire technique. By pricing an asset in terms of another traded asset (the numeraire), this technique [...]

An introduction to articles published within the issue is presented, including one which explored the effect of pandemics on equilibrium in an integrated model of an epidemic economy with production, another on the construction of portfolio models for estimating the unexpected loss, and one on the use of contingent convertible bonds (CoCo) to reduce risk-shifting incentives.

Byline: Zvi Wiener (1) Author Affiliation: (1) School of Business, The Hebrew University of Jerusalem, Israel Article History: Registration Date: 13/10/2004