• Financial reporting quality in private equity backed companies: the impact of ownership concentration

      Beuselinck, Christof; Manigart, Sophie (Vlerick Business SchoolVlerick Business School, 20052005)
      We argue and empirically show on a sample of 270 unquoted, private equity backed companies that the shareholder structure of private companies influences the quality of their accounting information. We show that companies in which private equity (PE) investors have a higher equity stake produce accounting information that is of lower quality than companies in which PE investors have a lower equity stake, controlling for company size and age. We argue that this is evidence that a large equity stake is a substitute for high earnings quality.
    • Private equity investments and disclosure policy

      Beuselinck, Christof; Deloof, Marc; Manigart, Sophie (Vlerick Business School, 2005)
    • Venture Capital, Private Equity and Earnings Quality

      Manigart, Sophie; Beuselinck, Christof; Deloof, Marc (Vlaamse Overheid - Dep. EWI, 2004)
    • Venture Capital, Private Equity and Earnings Quality

      Beuselinck, Christof; Deloof, Marc; Manigart, Sophie (Vlerick Business School, 2004)
      This paper examines the quality of financial statements reported by private equity (PE) backed companies in the years around the initial PE investment. We study both pre- and post-investment earnings characteristics of a unique hand-collected sample of 556 Belgian unlisted companies, receiving PE financing between 1985 & 1999, and a matched non-PE backed sample. We find strong evidence of upward earnings management in the PE backed sample prior to the investment year, consistent with the hypothesis that entrepreneurs which apply for PE manage earnings upward to catch PE investors' interest. Further, PE backed companies show a significantly higher extent of earnings conservatism compared to matched companies from the investment year on, indicating a governance impact of PE investors on the financial reporting discipline. Finally, we find a marginally higher degree of earnings conservatism for companies receiving PE from non-government related investors compared to companies backed by government-related PE investors. We interpret this stricter financial reporting discipline as being the reflection of a more slack governance by government-related PE investors compared to non-government-related investors. Our results have implications for PE investors as well as for all other stakeholders of PE backed firms.