Faculty of Economics and Business Administration Publications Database

Private Equity Returns and Disclosure around the World

Cumming, Douglas
Volume: 41
Number: 4
Pages: 727 - 754
ISSN-Print: 0047-2506
Link External Source: Online Version
Year: 2010
Abstract: To obtain more funds from the institutional investors, private equity (PE) fund managers may report inflated valuations of private investee companies that are not yet sold. However, such overvaluations may result in a reputational cost when those investments are realized. Using evidence from 39 countries, we show that there are significant systematic biases in managers'' reporting of fund performance. We find that these biases depend on the accounting and legal environment in a country, and on proxies for the degree of information asymmetry between institutional investors and PE fund managers.