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Private equity investments and disclosure policy

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  • Beuselinck, C.
  • Deloof, M.
  • Manigart,S.

    ()
    (Vlerick Leuven Gent Management School)

Abstract

We investigate whether a firm’s disclosure policy is affected by the changing corporate setting and intensified corporate governance associated with private equity (PE) investments. For a unique sample of unquoted PE backed firms we observe a significant switch to increased financial disclosure in the pre-investment year, consistent with the hypothesis that entrepreneurs attempt to reduce information asymmetries inherent to the PE application by increasing their disclosure levels. Further, we document that the governance and professionalization impact of PE investors affects their portfolio firms’ financial disclosure positively. Finally, differentiating on investor type (government versus non-government related) reveals no overall effect on disclosure, both in the pre- as in the post-investment years. Results are robust to various sensitivity checks.

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Bibliographic Info

Paper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2005-1.

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Length: 47 pages
Date of creation: 14 Feb 2005
Date of revision:
Handle: RePEc:vlg:vlgwps:2005-1

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Keywords: Disclosure; private equity; unlisted firms; monitoring; corporate governance Note;

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Cited by:
  1. McKenzie, Michael & Satchell, Stephen & Wongwachara, Warapong, 2012. "Nonlinearity and smoothing in venture capital performance data," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 782-795.
  2. Tom Caneghem & Geert Campenhout, 2012. "Quantity and quality of information and SME financial structure," Small Business Economics, Springer, vol. 39(2), pages 341-358, September.

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