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- Title
The Relationship Between Firm Performance and the Market's Trust in Security Estimates: Evidence from the Public Venture Capital Industry.
- Authors
Rozen, Hannah
- Abstract
Publicly traded venture capital (VC) funds invest in high risk startup companies. In the U.S., VCs report using Fair Value Accounting (ASR 118). Estimates are determined by management, and are thus subject to a certain degree of managerial discretion. The unique characteristics of VC's provide an ideal laboratory to examine the importance of fair value estimates to investors. We examine whether fair value estimates are relevant both in cases when a firm is performing well, and when it is not. We find that fair value estimates provide information incremental to historical cost only when firms' investments are performing well. This study adds to the fair value accounting debate and presents results useful for standard-setters in evaluating the effects of fair value reporting, even for investments that are not traded in active markets.
- Subjects
VENTURE capital; GOING public (Securities); FAIR value accounting; FINANCIAL performance; SECURITIES trading
- Publication
Journal of Accounting & Finance (2158-3625), 2015, Vol 15, Issue 4, p183
- ISSN
2158-3625
- Publication type
Article