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Private Equity Involvement and Earnings Quality

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Author Info
Christof Beuselinck
Marc Deloof
Sophie Manigart

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Abstract

This paper examines the relation between private equity (PE) investors' involvement and their portfolio firms' earnings quality. We operationalize earnings quality through comparative analyses of conditional loss recognition timeliness. For a sample of unlisted Belgian firms, we find that PE involvement increases a firm's willingness to recognize losses more timely as compared to industry, size and life-cycle matched non-PE backed firms. Further, we document more powerful earnings quality effects for firms backed by independent and captive PE-investors as compared to firms backed by government-related PE-investors. Finally, we find no systematic variation in earnings quality across different levels of PE ownership. Our results are robust to the inclusion of various controls and remain unaffected when we consider the endogeneity of PE investments and compare pre- and post PE investment years. The current results provide novel evidence towards the understanding of PE investors' governance implications for portfolio firms' earnings quality. Copyright (c) 2009 The Authors Journal compilation (c) 2009 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-5957.2009.02147.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Business Finance & Accounting.

Volume (Year): 36 (2009-06)
Issue (Month): 5-6 ()
Pages: 587-615
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:jbfnac:v:36:y:2009-06:i:5-6:p:587-615

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X

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This page was last updated on 2009-11-22.

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