Australian chief executive officer remuneration: pay and performance

International studies document strong evidence that chief executive officer (CEO) remuneration is positively correlated with corporate performance. Prior Australian studies, however, find no positive link between CEO pay and market performance. In the present paper we re‐examine the association between Australian CEO remuneration and firm performance using standard empirical models from the international literature. We find that in every respect the Australian evidence is consistent with international findings for firms of the USA, UK and Canada. In particular, we document CEO pay–performance association as positive and statistically significant.     

The determinants of director remuneration,executive tenure and individual executive disclosure in North African IPO firms

This paper examines the impact of board governance mechanisms, namely board size, independence ratio, opacity of earnings disclosure, and ratio of genuinely independent nonexecutive directors to total board size on director remuneration, executive tenure and likelihood of individual executive salary disclosure in a unique and comprehensive sample of 69 North African IPO firms. I find evidence of the enhanced governance role of true independent nonexecutives in family as opposed to non-family firms in improving disclosure of individual salaries and moderating lengths of executive tenure. However while their role is only significant in the context of family firms the evidence suggests that their presence is associated with higher levels of remuneration. The evidence also ascribes a greater role for business angel as opposed to more formal private equity financing which is more applicable within the highly social networked economy of the Maghreb region.     

Fund ownership,wealth, and risk-taking: Evidence on private equity managers

Private equity (PE) managers are required to invest their own money in the funds they manage. We examine the incentive effects of this ownership on the delegated acquisition decision. A simple model shows that PE managers select less risky firms and use more debt, the higher their ownership. We test these predictions for a sample of Norwegian PE funds, using managers’ wealth to capture their relative risk aversion. As predicted, the target company’s cash-flow risk decreases and leverage increases with the manager’s ownership scaled by wealth. Moreover, the overall portfolio risk decreases with ownership, mitigating widespread concerns about excessive risk-taking.     

Benchmarking private equity: The direct alpha method

We propose a simple and intuitive measure of the annualized excess return of investments in private equity (PE) funds, as well as in similar vehicles that hold hard-to-value assets. Our ‘Direct Alpha’ method is well-founded in theory and dominates the existing approaches to convert fund lifetime returns into inputs amenable for portfolio-wide optimization. Existing Public Market Equivalent (PME) approaches are either heuristic or involve significant approximation errors. Using real-world PE fund cash flow data, we juxtapose Direct Alpha against nearly all PME methods that have been in broad use.     

Privatization as an agency problem: Auctions versus private negotiations

This paper investigates the design of privatization mechanisms in emerging market economies characterized by political constraints that limit the set of viable privatization options. Our objective is to explain the striking diversity of mechanisms observed in practice and the frequent use of an apparently sub-optimal privatization mechanism: private negotiations.     

Chief executive officer remuneration disclosure quality: corporate responses to an evolving disclosure environment

We examine chief executive officer remuneration disclosure in Australia from 1998 to 2004. Disclosure was first required by the Company Law Review Act 1998 (CLRA98). Despite CLRA98's clear intentions, firms generally failed to comply until the requirements were formalized by Director and Executive Disclosures by Disclosing Entities (AASB1046), issued in 2004. For a sample of 124 firms, we find significant improvements in disclosure concurrent both with CLRA98 and AASB1046. We also find firm size, corporate governance, auditor quality, cross‐listing status and public scrutiny to be significant explanations of disclosure. Our results indicate that high quality disclosures will only come about through detailed, black letter requirements and that principle‐based legislation involving interpretative discretion is unlikely to produce the desired level of disclosure.     

Contracts and returns in private equity investments

We analyze the relationship between contracts and returns in private equity (PE) investments. Contractual control in the form of covenants tends to be employed to identify good deals. Better quality firms are more likely to have covenant-rich contracts, as they are less concerned by the constraints imposed by the covenants. PE investors appoint closer associates of the fund in deals that are performing poorly but tend to outsource board governance in better deals. Collectively, our evidence suggests that PE investors operate along two dimensions, choosing covenants and board seats differently, based on the ex ante quality of the company.     

Fueling the buyout machine: fundraising in private equity

This paper analyzes the impact of performance, investment-firm-related, and macroeconomic variables on fundraising activities in private equity (PE). We use a novel, backward-looking approach to link current to preceding funds, which allows for including several parallel predecessor funds in our analysis. We employ logit and tobit models to a global sample of 1463 fundraising events observed between 2000 and 2010 in order to estimate the probability of raising and the volume of follow-on funds. Our results show that the average buyout duration of past transactions has a negative impact, whereas exits via an initial public offering (IPO) and deals without industry-style drift positively affect fundraising activities. Larger, industry-diversified, and independent PE firms exhibit a higher likelihood of fundraising and collect larger amounts.     

中国PE：现状与趋势

近年来,中国私募股权投资基金获得了快速的发展。国务院最近下发文件进一步推动民间资本的发展,中国PE将迎来发展上的“春天”,对此,今年第四届中国企业国际融资洽谈会期间,在“推动全球资本交易,促进经济持续发展”的主题论坛上有关专家做了进一步分析     

Investment income taxes and private equity acquisition activity

Utilizing a novel identification strategy, we uncover evidence that reducing the investment income tax rate increases acquisition activity by private equity acquirers. Applying a difference-in-difference methodology, we find that acquisitions sponsored by private equity firms nearly doubled following the investment income tax rate reductions associated with the Taxpayer Relief Act of 1997 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. We attribute our findings to private equity fund structures and managing partners’ ability to capture the expected benefit of lower capital gains tax rates. These findings are robust to controlling for target shareholders’ tax incentives, as well as firm, industry, and macroeconomic factors possibly influencing acquisition activity.     

Venture capital and private equity investors,governance, and success of IPOs: Evidence from India

In this article, we examine the role of domestic and foreign venture capital and private equity (VCPE) firms in India. We find robust evidence that portfolio firms backed by foreign VCPE firms incorporate effective governance structures after the initial public offering (IPO). Specifically, these firms are associated with smaller, more independent, and gender-diverse boards. Furthermore, our results suggest that foreign VCPE firms continue their association with their portfolio firms in the post-IPO period by nominating directors to the boards. Our results also suggest that portfolio firms backed by foreign VCPE firms are associated with better long-term operating performance and profitability. This positive effect is exacerbated by the presence of independent and female directors. Collectively, our results support the view that good governance practices are key to the long-term success of a business, especially in economies that lack good legal systems, developed financial markets, and alternative investment opportunities and where developing trust between parties in a transaction is crucial.     

天津:全力打造私募基金最活跃的舞台

2005年底,在天津设立的第一家全国性股份制商业银行--渤海银行正式开业,2006年底,中国第一支产业投资基金--渤海产业投资基金在天津设立,同时渤海产业投资基金管理有限公司也正式挂牌.     

Earnings management,market discounts and the performance of private equity placements

Private equity placement data allow us to determine whether sophisticated investors can uncover the true value of firms. This can be done by defining sophisticated investors as those who meet the stringent participation requirements of the private equity market. Our results show private equity issuing firms overstate their earnings in the quarter preceding private equity placement announcements and that sophisticated investors do not ask for a fair discount when purchasing the shares of the private issuing firms. We also find evidence showing that the reversal of the effects of pre-issue earnings management is a significant determinant of the long-term performance of private issues. Results further show that post-issue stock performance and operating performance of firms using “aggressive” earnings management significantly underperform those using more “conservative” earnings management.     

解读股权众筹办法五看点

为拓展中小微企业直接融资渠道,促进创新创业和互联网金融健康发展,提升资本市场服务实体经济的能力,在证监会创新业务监管部支持下,2014年12月18日,中国证券业协会发布了《私募股权众筹融资管理办法（试行）（征求意见稿）》（以下简称“《意见稿》”）,向社会公开征求意见。鉴于该《意见稿》在社会上的反响较大,清科研究中心特就此《意见稿》五个方面进行分析,以期为投融资者提供借鉴和帮助。     

The risk appetite of private equity sponsors

Using a unique proprietary data set of 460 realized buyouts completed between 1990 and 2005, we examine the risk appetite of private equity (PE) sponsors in different states of the PE market and analyze key determinants of deal-level equity risk. We develop a new approach to mathematically model PE investment equity risk based on the Black-Cox default model. We find higher equity volatilities during boom periods. Further, deals conducted by more reputed PE sponsors have lower equity volatilities as they are unwilling to imperil their reputation by taking excessive risks. In addition, we find that PE sponsors' risk appetite is negatively related to the ownership stake in the buyout target company.     

The implied cost of equity capital,corporate investment and chief executive officer turnover

This study investigates how the cost of equity capital, along with corporate investment, affects chief executive officer (CEO) turnover decisions. We hypothesize that the cost of equity conveys information about firm performance uncertainty that is informative of CEO talent. Consistently, our empirical results show that the likelihood of CEO turnover is positively associated with the implied cost of equity, after controlling for earnings and stock performance measures and risk factors. Additional analysis of reverse causality supports the causal effect of the high cost of equity on CEO dismissals. We also find that the positive association is more pronounced for firms that are more likely to suffer from underinvestment problems. These results suggest that the cost of equity plays a more important role in assessing CEO performance when the firm needs more external equity capital to pursue investment opportunities.     

Access to private equity and real firm activity: Evidence from PIPEs

We study how access to private equity financing affects real firm activities using a broad panel of publicly traded U.S. firms that raise external equity through private placements (PIPEs) between 1995 and 2008. The public firms relying on PIPEs are generally small, high-tech firms that cannot finance investment internally and likely face severe external financing constraints; PIPEs are by far the most important source of finance for these firms. We show that firms use PIPE inflows to maintain extremely high R&D investment ratios and to build substantial cash reserves. We also use GMM techniques that control for firm-specific effects and the endogeneity of the decision to raise private equity and find that PIPE funding has a substantial impact on corporate investment in cash reserves and R&D, and a smaller but significant impact on investment in non-cash working capital, but little impact on fixed investment or acquisitions. Our estimates indicate that R&D investment initially increases by $0.20–$0.25 for each dollar of private equity flowing into the firm, and that PIPE funds initially invested in cash ultimately go to R&D. These findings offer direct evidence that access to private equity finance has an important effect on the key input that drives innovation at the firm- and economy-wide levels.     

Regulatory harmonization and the development of private equity markets

This paper introduces a new dataset from 100 Dutch institutional investors’ domestic and international asset private equity allocations. The data indicate that the perceived comparative dearth of regulations of private equity funds impedes institutional investor participation in private equity funds, particularly in relation to the lack of transparency. The data further indicate that the perceived importance of regulatory harmonization of institutional investors has increased Dutch institutional investor allocations to domestic and international private equity funds. The Financieel Toetsingskader (regulation of portfolio management standards such as matching of assets and liabilities) has had the most pronounced and robust effect, followed by Basel II (regulation of risk management and disclosure standards) and the International Financial Reporting Standards (regulation of reporting standards and transparency).     

Reliability and relevance of fair values: private equity investments and investee fundamentals

Review of Accounting Studies - We directly test the reliability and relevance of investee fair values reported by listed private equity funds (LPEs). In our setting, disaggregated fair value...