Do Public Financial Statements Influence Venture Capital and Private Equity Financing?

73 Pages Posted: 25 Jun 2021

See all articles by Brian K. Baik

Brian K. Baik

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Natalie Berfeld

Boston College - Carroll School of Management

Rodrigo S. Verdi

Massachusetts Institute of Technology (MIT)

Date Written: June 12, 2021

Abstract

We study whether private firm public financial statements influence the probability of raising venture capital (VC) and private equity (PE) financing. We hypothesize that private firms' public financial statements can help the VC/PE search process by providing a less costly screening tool to identify potential targets at the pre-investment stage. Using two complementary settings, we find that an increase in financial statement availability/transparency is associated with an increase in the probability of a private firm obtaining VC/PE financing. Our evidence highlights the importance of public financial statements in the decision of making of private investors in the early stages of a private firm's financing process.

Keywords: private equity, venture capital, financial reporting regulation, private firms

JEL Classification: M41, M2, G24, G34

Suggested Citation

Baik, Brian and Berfeld, Natalie and Verdi, Rodrigo S., Do Public Financial Statements Influence Venture Capital and Private Equity Financing? (June 12, 2021). Available at SSRN: https://ssrn.com/abstract=3867958 or http://dx.doi.org/10.2139/ssrn.3867958

Brian Baik

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

Natalie Berfeld

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Rodrigo S. Verdi (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

Sloan School of Management
100 Main Street E62-666
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)

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