Abstract
Previous research on reporting and disclosure in private equity (buyout and venture capital) has primarily focused on describing the contractual clauses between portfolio company, fund manager and fund investor, and on explaining its origin in terms of more general economic concepts. In comparison, we look at the actual reporting behaviour and information flow of the private equity (mainly venture capital) fund manager to the fund investors, based on access to a fund investor's database. Our findings should not only be of interest to the fund investor with respect to good investment monitoring and portfolio management, but also be useful to get an intimate look at the often hidden underlying dynamics of the private equity fund industry, like information flow, and to observe the actual implementation of the contractual clauses on reporting. Overall, we find that the European private equity industry has improved their reporting qualitatively and quantitatively, especially in terms of shorter delivery times of reports. We attribute this change mainly to the introduction of the EVCA reporting guidelines and a willingness by both, fund managers and investors, to report voluntary or contractually bind by contract to report in accordance to these standards. Information flow has become faster during the last years but it still takes on average more than four months for information to travel from the portfolio company to the fund investor's database. Fund characteristics like experience, stage and focus also affect the reporting behaviour. For example, mid market funds, first time funds and non audited reports have a lower reporting frequency than venture capital, non first time funds or audited reports. On the other hand, audited reports take significantly longer to get to the fund investor. We also point out that aspects of the relationship between the entrepreneur and fund manager are also often found at the next level, between fund managers and investors.
Published Version
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