Private Equity Involvement and Earnings Quality

29 Pages Posted: 13 Oct 2009

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Marc Deloof

University of Antwerp; University of Antwerp - Antwerp Management School

Sophie Manigart

Vlerick Business School; Ghent University

Multiple version iconThere are 2 versions of this paper

Date Written: 2009-03

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.

Suggested Citation

Beuselinck, Christof and Deloof, Marc and Manigart, Sophie, Private Equity Involvement and Earnings Quality (2009-03). Journal of Business Finance & Accounting, Vol. 36, Issue 5-6, pp. 587-615, June/July 2009. Available at SSRN: https://ssrn.com/abstract=1486376 or http://dx.doi.org/10.1111/j.1468-5957.2009.02147.x

Christof Beuselinck (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Puteaux, 92800
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+33320545892 (Phone)

Marc Deloof

University of Antwerp ( email )

Prinsstraat 13
Faculteit TEW
Antwerpen, 2000
Belgium
+32 3 265 41 69 (Phone)
+32 3 265 47 99 (Fax)

HOME PAGE: http://https://www.uantwerpen.be/en/staff/marc-deloof/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Sophie Manigart

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

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