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Does a leopard change its spots? Auditors and lawyers as valuation experts for minority shareholders in the judicial appraisal of private firms

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Item embargoed until 2022-01-17. Restrictions imposed by the publisher
Self archived version
final draft
Date
2020
Author(s)
Saastamoinen, Jani
Savolainen, Hanna
Unique identifier
10.1111/jbfa.12436
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Self-archived article

Citation
Saastamoinen, Jani. Savolainen, Hanna. (2020). 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 and accounting, [Epub ahead of print 17 Feb 2020], 10.1111/jbfa.12436.
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Abstract

Agency theory suggests that minority shareholders in private firms are vulnerable to shareholder oppression, which necessitates shareholder protection. This paper investigates a form of shareholder protection, the special representative of minority shareholders, which is used in Finland and Sweden. The special representative is a valuation expert, typically an auditor or a lawyer, who assists minority shareholders in shareholder dissent cases which require judicial appraisal of the minority interest in a firm. The different codes of conduct associated with these professions may manifest themselves in their performance as valuation experts. We examine a comprehensive data set of judicial valuation cases of Finnish private firms, in which the judge learns the valuation estimates of the controlling shareholder, the minority shareholder and the special representative and then issues a verdict on the fair price of the firm's shares. Our findings indicate that the special representative benefits minority shareholders by reducing the gap between the minority shareholders’ and the judge's valuation estimates. Our results also suggest that the special representative's professional background may affect how he or she values the company. We find that special representatives who are auditors propose more conservative valuation estimates than lawyers do.

Subjects
auditor   judicial valuation   law and finance   lawyer   minority shareholder protection   private business valuation   sell‐out   squeeze‐out   valuation experts   
URI
https://erepo.uef.fi/handle/123456789/8073
Link to the original item
http://dx.doi.org/10.1111/jbfa.12436
Publisher
Wiley
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  • Yhteiskuntatieteiden ja kauppatieteiden tiedekunta [369]
University of Eastern Finland
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