Mutual Fund Investments in Private Firms

65 Pages Posted: 27 Mar 2017 Last revised: 20 May 2017

Sungjoung Kwon

Drexel University - Bennett S. LeBow College of Business

Michelle Lowry

Drexel University

Yiming Qian

University of Iowa - Department of Finance

Date Written: April 20, 2017

Abstract

Historically a key advantage of being a public firm was broader access to capital, from a disperse group of shareholders. In recent years such capital has increasingly become available to private firms as well. We document a dramatic increase over the past twenty years in the number of mutual funds participating in private markets and in the dollar value of these private firm investments. Consistent with theory, mutual funds rely heavily on the certification of intermediaries to evaluate these high information asymmetry, private firms. Consistent with the greater availability of capital changing the trade-off between private and public listing status, we find that mutual fund investments enable companies to stay private an average one to two years longer.

Keywords: private firm, mutual fund, IPO

JEL Classification: G23, G24, G32

Suggested Citation

Kwon, Sungjoung and Lowry, Michelle and Qian, Yiming, Mutual Fund Investments in Private Firms (April 20, 2017). Available at SSRN: https://ssrn.com/abstract=2941203 or http://dx.doi.org/10.2139/ssrn.2941203

Sungjoung Kwon

Drexel University - Bennett S. LeBow College of Business ( email )

101 N. 33rd St.
Philadelphia, PA 19104
United States

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

Yiming Qian

University of Iowa - Department of Finance ( email )

S382 Pappajohn Building
Iowa City, IA 52242
United States
319-335-0934 (Phone)
319-335-3690 (Fax)

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