Benefits of Public Reporting: Evidence from IPOs Backed by Listed Private Equity Firms
38 Pages Posted: 14 Feb 2015 Last revised: 4 Jan 2017
Date Written: October 2016
Private equity firms that are listed in stock exchanges commit to extensive public disclosures. In contrast, unlisted private equity firms communicate privately with partner investors. We examine the reporting quality of portfolio companies that are backed by listed and unlisted private equity firms worldwide. We find that portfolio companies that are backed by listed private equity firms report lower abnormal accruals, recognize losses faster, and experience higher post-IPO stock returns. These findings are stronger for smaller and European portfolio companies, and those that receive direct private equity investments. Overall, our findings suggest that the public reporting model of listed private equity firms brings greater capital market benefits than the private reporting model of unlisted private equity firms.
Keywords: Listed private equity, IPO, earnings management
JEL Classification: G24, D80
Suggested Citation: Suggested Citation