Private Equity Fund Reporting Quality and External Monitors, Third-party Service Provider

Internal Seminar for Researchers

Research Area: Accounting

Abstract: In the paper we examine variation in the reporting quality of private equity funds, in particular buyout and venture capital funds, relative to external monitoring, third-party service providers, and fund attributes. In contrast to evidence from public markets, we find limited evidence that investors are associated with private equity fund reporting quality, measured as the accuracy and bias of funds’ disclosed net asset values (NAVs). That said, we find evidence that fund NAV accuracy and bias vary with auditor involvement and the use of third-party service providers (i.e., valuation specialists, marketers, and administrators). Further, these relations differ across fund types and often differ from evidence from public markets. We provide important evidence for investors and regulators as private equity supersedes public markets as the main vehicle to raise capital.