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Private equity returns and disclosure around the world

Author

Listed:
  • Douglas Cumming

    (Schulich School of Business, York University, Toronto, Canada)

  • Uwe Walz

    (Center for Financial Studies, Goethe-Universit&aauml;t Frankfurt/Main, Frankfurt, Germany)

Abstract

To obtain more funds from the institutional investors, private equity (PE) fund managers may report inflated valuations of private investee companies that are not yet sold. However, such overvaluations may result in a reputational cost when those investments are realized. Using evidence from 39 countries, we show that there are significant systematic biases in managers' reporting of fund performance. We find that these biases depend on the accounting and legal environment in a country, and on proxies for the degree of information asymmetry between institutional investors and PE fund managers.

Suggested Citation

  • Douglas Cumming & Uwe Walz, 2010. "Private equity returns and disclosure around the world," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(4), pages 727-754, May.
    • Handle: RePEc:pal:jintbs:v:41:y:2010:i:4:p:727-754
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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