Private Equity Investments and Disclosure Policy

Abstract

In the current study, we dynamically analyze unlisted firms' voluntary disclosure decisions around private equity (PE) participation. First, we disentangle the role of disclosure in attracting PE investments. In addition, we examine the extent to which a firm's disclosure policy is affected by the changing corporate setting and intensified corporate governance after having received PE. We find no evidence that firms would employ increased disclosure to signal their quality in the years preceding the PE financing. However, we document a significant switch to increased financial disclosure from the PE investment year onwards, consistent with the hypothesis that PE investor presence positively affects portfolio firms' disclosure decisions. Further, we show that the proportional PE ownership stake is positively related to increased disclosure, but only at very high ownership levels. We explain these results in that both internal and external information demands call for higher public disclosure in PE firms. We conclude that the changing information environment resulting from a PE investment stimulates increased public financial disclosure. Our results contribute to illustrate how an indisputable change in governance resulting from a PE investment affects inter-temporal corporate disclosure decisions in unlisted firms.

The nature and determinants of disclosure practices in the insurance industry: Evidence from European insurers

“…Moreover, the existing literature always measures the quantity of disclosure through a selfconstructed disclosure index (Adams and Hossain, 1998;Barako et al, 2006;Baumann and Nier, 2004;Beretta and Bozzolan, 2004;Beretta and Bozzolan, 2008;Beuselinck et al, 2008;Botosan, 1997;Camffermann and Cooke, 2002;Cooke, 1989;Cooke, 1992;Cooke, 1993;Francis et al, 2007;Hirtle, A C C E P T E D M A N U S C R I P T…”

Private Equity Involvement and Earnings Quality

“…Our study contributes to several strands of the literature. It expands the growing literature on accounting choices of PE backed companies (Hand, 2005; Armstrong et al, 2006; Morsfield and Tan, 2006; and Beuselinck et al, 2008). Most studies, however, are limited to periods surrounding the IPO largely because of data unavailability before going public 2 .…”

Disclosure Practices and Financial Crisis: Empirical Evidences in the European Insurance Industry

“…The existing literature measures the level of disclosure through a self-constructed disclosure index (Cooke, 1989;Cooke, 1992;Cooke, 1993;Botosan, 1997;Adams and Hossain, 1998;Ho and Wong, 2001;Camffermann and Cooke, 2002;Beretta and Bozzolan, 2004;Baumann and Nier, 2004;Barako et al, 2006;Hirtle, 2007;Francis et al, 2007;Beretta and Bozzolan, 2008;Beuselinck et al, 2008;Perignon and Smith, 2008;Horing and Grundl, 2011). A disclosure index is an ex ante specified list of items; in this process, the documents are analyzed in order to evaluate the presence of these items and, based on the presence and the quality of each information, a score is assigned to each of them (Horing and Grundl, 2011).…”

“…A disclosure index is an ex ante specified list of items; in this process, the documents are analyzed in order to evaluate the presence of these items and, based on the presence and the quality of each information, a score is assigned to each of them (Horing and Grundl, 2011). Botosan (1997) constructs a disclosure index based on five categories of voluntary information that firms provided in their annual reports in 1990; Beuselinck et al (2008) find a significant increase of financial disclosure from the private equity investment year onward and no evidence in the years preceding the private equity financing; Baumann and Nier (2004) build an index for measuring disclosure in the banking system; the index presented by Horing and Grundl (2011) measures the extent of risk disclosure by insurance companies.…”