Hedge Funds and Corporate Misreporting

48 Pages Posted: 15 Aug 2017

See all articles by Na Dai

Na Dai

SUNY at Albany - School of Business

Alfred Z. Liu

University at Albany, SUNY

Date Written: August 14, 2017

Abstract

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

Dai, Na and Liu, Zhu, Hedge Funds and Corporate Misreporting (August 14, 2017). Available at SSRN: https://ssrn.com/abstract=3018549 or http://dx.doi.org/10.2139/ssrn.3018549

Na Dai (Contact Author)

SUNY at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

Zhu Liu

University at Albany, SUNY ( email )

Albany, NY 12222
United States

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