Private Equity Involvement and Earnings Quality

Posted: 26 Jan 2004 Last revised: 10 Jan 2011

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Marc Deloof

University of Antwerp; University of Antwerp - Antwerp Management School

Sophie Manigart

Vlerick Business School; Ghent University

Multiple version iconThere are 2 versions of this paper

Date Written: March 10, 2009

Abstract

This paper examines the relation between private equity (PE) investors' involvement and their portfolio firms' earnings quality. We operationalize earnings quality through comparative analyses of conditional loss recognition timeliness. For a sample of unlisted Belgian firms, we document that PE involvement increases a firm's willingness to recognize losses more timely compared to industry, size and life-cycle matched non-PE backed firms. Further, we find more powerful earnings quality effects for firms backed by independent and captive PE investment houses compared to firms backed by government-related PE. Finally, we find no systematic variations in earnings quality across different levels of PE ownership proportions. Our results are robust to the inclusion of various controls and are unaffected by the endogenous PE financing choice. The current results provide novel evidence towards the understanding of PE investors' governance implications for portfolio firms' earnings quality.

Keywords: Earnings quality, earnings conservatism, loss recognition timeliness, private equity

JEL Classification: G32, M13, M41

Suggested Citation

Beuselinck, Christof and Deloof, Marc and Manigart, Sophie, Private Equity Involvement and Earnings Quality (March 10, 2009). Journal of Business Finance and Accounting, Vol. 36, No. 5-6, pp. 587-615, 2009. Available at SSRN: https://ssrn.com/abstract=483522

Christof Beuselinck (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Puteaux, 92800
France
+33320545892 (Phone)

Marc Deloof

University of Antwerp ( email )

Prinsstraat 13
Faculteit TEW
Antwerpen, 2000
Belgium
+32 3 265 41 69 (Phone)
+32 3 265 47 99 (Fax)

HOME PAGE: http://https://www.uantwerpen.be/en/staff/marc-deloof/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Sophie Manigart

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
4,609
PlumX Metrics