Private Equity Involvement and Earnings Quality |
| |
| Authors: | Christof Beuselinck Marc Deloof Sophie Manigart |
| |
| Affiliation: | The authors are respectively from Tilburg University, CentER;University of Antwerp and Universitécatholique de Louvain;and Ghent University and Vlerick Leuven Ghent Management School. They thank Martin Walker (editor) and an anonymous referee as well as Willem Buijink, Ignace De Beelde, Wouter De Maeseneire, Robert Faff, Peter Joos, Peter Pope, Scott Richardson, Henri Servaes, Avanihdar Subramanyam, Sigrid Vandemaele, Heidi Vander Bauwhede and seminar participants at the University of Amsterdam (UvA), Antwerp, Diepenbeek, Ghent and Leuven. This paper has also benefited from presentations at the Doctoral Student Symposium of the Financial Management Association (Dublin), the Euroconference on Financial Regulation and Reporting (Île Rousse), the 8th Belgian Financial Research Forum (Diepenbeek), the European Financial Management Association Conference (Helsinki), the Vereniging voor Economie Conference (Antwerp), the Accounting Research Workshop (Amsterdam, VU) and the American Accounting Association Conference (San Francisco). Financial support from the Fonds voor Wetenschappelijk Onderzoek (Grant n°G.0012.02) is kindly appreciated. Part of this work was executed when Christof Beuselinck was a PhD student at Ghent University. Earlier drafts of this paper were distributed under different titles. The usual disclaimer applies. |
| |
| Abstract: | 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 find that PE involvement increases a firm's willingness to recognize losses more timely as compared to industry, size and life-cycle matched non-PE backed firms. Further, we document more powerful earnings quality effects for firms backed by independent and captive PE-investors as compared to firms backed by government-related PE-investors. Finally, we find no systematic variation in earnings quality across different levels of PE ownership. Our results are robust to the inclusion of various controls and remain unaffected when we consider the endogeneity of PE investments and compare pre- and post PE investment years. The current results provide novel evidence towards the understanding of PE investors' governance implications for portfolio firms' earnings quality. |
| |
| Keywords: | earnings quality conditional conservatism loss recognition timeliness private equity |
|
|
