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Private equity net asset values and future cash flows
- Source :
- The Accounting Review.
- Publication Year :
- 2019
-
Abstract
- This study analyzes whether fair value estimates of fund net asset values (NAVs) produced by private equity managers are accurate and unbiased predictors of future discounted cash flows (DCFs). We exploit the fact that private equity funds have finite lives to compare reported NAVs to DCFs based on realized cash flows for 384 Venture Capital (VC) funds and 195 Buyout funds spanning 1988–2016. Findings reveal that Buyout funds' NAVs display little systematic bias, but VC funds' NAVs are relatively aggressively biased compared to Buyout funds, especially since 2000. Accuracy is worse in the first half of the sample period even though NAV estimates generally are more conservative. Overall, the results reveal significant differences in the association between NAVs and DCFs for Buyout versus VC funds, which is particularly important for private equity fund investors in their consideration of the relevance and reliability of NAV estimates provided by fund managers.
- Subjects :
- Economics and Econometrics
050208 finance
business.industry
Financial economics
05 social sciences
Private equity firm
050201 accounting
Private equity fund
Net asset value
Private equity
Gross asset value
Accounting
Fair value
0502 economics and business
Economics
Cash flow
Asset (economics)
business
Alternative asset
Finance
Subjects
Details
- ISSN :
- 15587967 and 00014826
- Database :
- OpenAIRE
- Journal :
- The Accounting Review
- Accession number :
- edsair.doi.dedup.....48f4acefde7edbd2f31caa774985dd41