Valuation of Stock Options of Non-Publicly Traded Companies

William R. Cron and Randall B. Hayes
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William R. Cron: Central Michigan University
Randall B. Hayes: Central Michigan University

American Journal of Business, 2007, vol. 22, issue 1, pages 11-19

Abstract: Recent developments in accounting for stock options have increased interest in the analytical techniques used to value them. Techniques used to value the options of publicly traded companies have been extensively discussed. In contrast, there has been almost no discussion of the valuation procedures of the options for non-publicly traded companies. This paper addresses this gap. The paper suggests that a straightforward income capitalization model can be used to develop reasonable surrogates for the variables of the Black-Scholes option pricing model. The paper also discusses how to adjust the income capitalization model for both lack of marketability and lack of control discounts.

Keywords: stock options; valuation; capitalization model (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2007

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Persistent link: http://EconPapers.repec.org/RePEc:maj:ancoec:v:22:y:2007:i:1:p:11-19

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