THE FAIR VALUE OF MINORITY STOCK IN CLOSELY HELD CORPORATIONS

In this Article, Professor Shishido examines the various methods-those used by the courts as well as those suggested by law and economics sc holars-for determining the fair value of minority stock in closely hel d corporations. In Professor Shishido's view, the courts' method of we ighing-the so-called Delaware block method-fails to arrive at the true value of the minority's shares and often under-values their worth. Pr ofessor Shishido also argues that law and economics scholars fail to d ifferentiate between closely held corporations and publicly held corpo rations, thus failing to include the effect of corporate law on the fa ir value of closely held corporate stock. Professor Shishido proposes that fair value is a matter of both normative and positive analyses. A fter examining the conflicts of interest between the majority and mino rity shareholders of closely held corporations, Professor Shishido con cludes that fair value equals best-use value defined as the higher of the cash flow discounted value and the asset value. Professor Shishido asserts that the best-use value grants majority shareholders due entr epreneurial rewards while preventing an undervaluation of minority sha reholders' investment.