Research

Working papers


Job market paper: Private equity fund valuation management during fundraising: Evidence from buyout funds and their portfolio firm financial statements

  • Dissertation committee: Profs Rodrigo Verdi (Chair), John Core, and Michelle Hanlon

  • Abstract: I investigate whether and how private equity fund managers (GPs) inflate their interim fund valuations (NAVs) during fundraising periods. Specifically, I study the extent to which the GPs inflate NAVs by managing valuation assumptions (e.g. valuation multiples) and/or by influencing the financial metrics (e.g. EBITDA and sales) reported by the private firms in their portfolios. Using a sample of buyout funds and their portfolio firms in Europe, I find that low reputation funds show more dramatic forms of NAV inflation by managing not only valuation multiples but also portfolio firm performance upward. Overall, I illustrate the mechanisms behind inflated fund valuations during fundraising periods and provide evidence supportive of the argument that low reputation GPs are manipulating NAVs than timing fundraising periods.


Do public financial statements influence venture capital and private equity financing? (with Natalie Berfeld and Rodrigo Verdi)

Link to paper

  • Featured at the CLS Blue Sky Blog

  • Abstract: We study whether private firm public financial statements influence the probability of raising venture capital (VC) and private equity (PE) financing. We hypothesize that private firms’ public financial statements can help the VC/PE search process by providing a less costly screening tool to identify potential targets at the pre-investment stage. Using two complementary settings, we find that an increase in financial statement availability/transparency is associated with an increase in the probability of a private firm obtaining VC/PE financing. Our evidence highlights the importance of public financial statements in the decision-making of private investors in the early stages of a private firm’s financing process.


Breaking news! Venture capital influences startup media coverage (with Albert Shin)

  • Abstract: We find that venture capital (VC) investment is related to a significant increase in media coverage of the portfolio firms. Using two stage least squares (2SLS) regression, we document a causal link between VC investment and increase in media coverage post VC investment - both in quantity and reach. Our tests reveal that both VC monitoring and VC certification could be the mechanisms behind the increase in media coverage. Increased media coverage is also associated with better exit outcomes and reduce the time taken for the firm to secure another round of VC funding. Taken together, our analyses highlight the impact VC investors bring to their investments leveraging the media.


Work-in-progress


Leveraged buyouts and target firm marginal tax rates (with Michelle Hanlon)

  • Progress: Regression analyses and write-up stage

  • In this paper, we investigate whether leveraged buyout investors exploit the tax benefits by choosing a target firm with higher after-financing marginal tax rates, or use higher proportion of debt to fund a leveraged buyout transaction, when they are actually investing in higher after-financing marginal tax rate target firms.


Tax expertise and entrepreneurship (with Ryan Hess, Jinhwan Kim, and Rebecca Lester)

  • Progress: Data collection stage

  • This paper studies the role of taxation in start-up enterprises. Using payroll tax credit election that permits qualified start-up companies to apply R&D tax credit to its payroll liability, we plan to test the extent to which tax considerations affect the early operations of entrepreneurial business, and the economic factors that affect business responsiveness to tax incentives.