Hedge Funds and Corporate Misreporting
48 Pages Posted: 15 Aug 2017
Date Written: August 14, 2017
We examine the roles of hedge funds in corporate financial misreporting using a unique dataset of private investments in public equity (PIPEs) transactions. We show that PIPE issuers are more likely to engage in financial misreporting when a hedge fund is the lead investor in the offering. We further find hedge funds do take actions to protect themselves from such risk by requesting significantly more contractual protections. Our results are robust after carefully controlling for the endogeneity issue using the control function approach and the propensity score matching method.
Keywords: Hedge funds, Corporate Misreporting, Financial contracting
JEL Classification: G23, G30, G32
Suggested Citation: Suggested Citation