Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules

68 Pages Posted: 18 May 2015 Last revised: 7 Aug 2019

Multiple version iconThere are 2 versions of this paper

Date Written: July 17, 2017

Abstract

This paper uses three alternating changes in hedge fund regulation to study whether regulation reduces hedge funds’ misreporting, and, if so, why regulation is effective. Relative to public companies, hedge fund regulation is relatively light. Much of the regime is a “comply-or-explain” regime that allows funds to forego compliance with governance rules, providing that they disclose their lack of compliance. The results show that regulation reduces misreporting at hedge funds. Further analysis suggests that the disclosure requirements led funds to make changes in their internal governance, such as hiring or switching the fund’s auditor, and that these changes induced funds to report their financial performance more accurately.

Keywords: Mandatory disclosure, hedge funds, SEC regulation, financial misreporting, auditing

JEL Classification: G28, D78, K20, K42

Suggested Citation

Honigsberg, Colleen, Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules (July 17, 2017). Journal of Accounting Research, Forthcoming, Columbia Business School Research Paper No. 15-58, Available at SSRN: https://ssrn.com/abstract=2607316 or http://dx.doi.org/10.2139/ssrn.2607316

Colleen Honigsberg (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States

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