Reporting Bias in Private Equity: Reporting Frequency, Endowments, and Governance

Abstract

Using PitchBook’s private equity (PE) database of 5,068 PE funds from 44 countries for the 2000 to 2012 period, we show that endowments are systematically associated with less pronounced differences between unrealized returns and subsequently realized returns. Moreover, endowments receive more frequent reports from their PE funds, implying more stringent governance. We find that higher reporting frequencies from PE funds are correlated with a lower tendency for the limited partners to receive overstated performance reports. These findings persist after controlling for stock market conditions, legal environments and origins, fund and GP characteristics, PE fund types, as well as cultural dimensions.

Keywords: Private Equity, Reporting, Performance