The Silent Majority: Private U.S. Firms and Financial Reporting Choices

This paper uses three alternating changes in hedge fund regulation to study whether regulation reduces hedge funds' misreporting, and, if so, why regulation is effective. Relative to public companies, hedge fund regulation is relatively light. Much of the regime is a "comply-or-explain" framework that allows funds to forego compliance with governance rules, providing that they disclose their lack of compliance. The results show that regulation reduces misreporting at hedge funds. Further analysis suggests that the disclosure * Stanford Law School.Accepted by Christian Leuz. I am greatly indebted to the five members of my dissertation committee:

Section: Introductionsupporting

confidence: 84%

Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules

Honigsberg

2019

“…Second, while prior studies tend to emphasize how targets' accounting information reduces information uncertainty (Skaife and Wangerin [2013], Raman, Shivakumar, and Tamayo [2013], McNichols and Stubben [2015], Chen et al [2018]), the results of this study suggest that accounting disclosures can play a governance role in M&As. Third, by examining the usefulness of private firms' accounting information in acquisitions of private targets, this study contributes to the literature on financial reporting of private firms (Allee and Yohn [2009], Minnis [2011], Lisowsky and Minnis [2018]).…”

Section: Resultsmentioning

confidence: 98%

“…[]), the results of this study suggest that accounting disclosures can play a governance role in M&As. Third, by examining the usefulness of private firms’ accounting information in acquisitions of private targets, this study contributes to the literature on financial reporting of private firms (Allee and Yohn [], Minnis [], Lisowsky and Minnis []).…”

Section: Resultsmentioning

confidence: 99%

The Disciplinary Role of Financial Statements: Evidence from Mergers and Acquisitions of Privately Held Targets

Chen

2019

This study examines whether requiring the disclosure of audited financial statements disciplines managers' mergers and acquisitions (M&As) decisions. When an M&A transaction meets certain disclosure thresholds, the Securities * University of Illinois at Urbana-Champaign.Accepted by Douglas Skinner. This paper is based on my dissertation completed at the University of Iowa. I am indebted to my dissertation cochairs Dan Collins and Rick Mergenthaler for their invaluable guidance and support. I thank my dissertation committee members Paul Hribar, Dave Mauer, and Anand Vijh for their helpful feedback. I also received constructive comments and suggestions from and Exchange Commission (SEC) requires the public acquirer to disclose the target's audited financial statements after the merger is completed. Using hand-collected data, I find that the disclosure of private targets' financial statements is associated with better acquisition decisions. Furthermore, I find that this disciplining effect of disclosure is more pronounced when monitoring by outside capital providers is more difficult and costly, and when other disciplining mechanisms are weaker. Finally, these findings are robust to several alternative explanations, such as monitoring from blockholders and voluntary disclosures. In sum, the evidence suggests that the ex post mandatory disclosure of private targets' accounting information disciplines managers' acquisition decisions and improves acquisition efficiency. JEL codes: G34; M40; M41; M48

“…SMEs are more likely to use bank loans as a primary source of debt capital (Strahan and Weston [1998], Berger, Klapper, and Udell [2001], Cetorelli and Strahan [2006]). SMEs are less likely to produce audited GAAP financial statements (Lisowsky and Minnis [2018]) and lack the common outside monitors of larger firms share (e.g., analysts or pension funds). SMEs are also more likely to be closely held, suggesting that potential conflicts between banks and shareholders will be greater.…”

Section: How Tax Enforcement Can Affect Banks Via Lending To Corporatmentioning

confidence: 99%

Corporate Tax Enforcement Externalities and the Banking Sector

Gallemore

Jacob

2020

We explore whether corporate tax enforcement can affect bank lending. Specifically, we hypothesize that tax enforcement efforts aimed at small and midsized enterprises (SME) can improve their information environments, which in turn could lead to increased bank commercial lending. Exploiting the regional structure employed by the IRS until 1999, we find that the corporate tax return audit probability for SMEs is associated with greater commercial lending growth for regionally focused banks. We find similar evidence