scholarly journals Public versus Private: New Insights into the Private Company Discount

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Sabrina Goetz
Keyword(s):  
Lower Risk ◽  
Firm Characteristics ◽  
Publicly Traded ◽  
Private Company ◽  
Private Companies ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Percentage Difference ◽  
Industry Membership ◽  
Public Versus Private

Abstract We examine whether private companies are valued with a discount compared to publicly traded companies. The analysis is based on a comparison of private company transactions with those of public companies. Whereas prior studies build pairs based on industry membership, we match private companies with public counterparts that are comparable in value relevant firm characteristics, i.e. profitability, risk, and growth, to calculate the percentage difference in valuation multiples. We find that private companies are valued on average with a discount on the EBITDA-multiple of 13% compared to their public counterparts. Private companies sell at lower discounts, if the acquirer firm is publicly listed. As size is associated with lower risk, we show that larger private companies sell at lower discounts.

Financial Reporting Fraud: Public and Private Companies

2016 ◽  
Vol 1 (1) ◽  
pp. A27-A41 ◽  
Author(s):  
A. Scott Fleming ◽  
Dana R. Hermanson ◽  
Mary-Jo Kranacher ◽  
Richard A. Riley
Keyword(s):  
Financial Reporting ◽  
Primary Objective ◽  
Private Company ◽  
Private Companies ◽  
Public And Private ◽  
Public Companies ◽  
Multivariate Tests ◽  
Public Company ◽  
Public Versus Private ◽  
Financial Reporting Fraud

ABSTRACT This study uses survey data gathered by the Association of Certified Fraud Examiners (ACFE) and provided to the Institute for Fraud Prevention (IFP) to examine differences in the profile of financial reporting fraud (FRF) between private companies and public companies. Although private companies represent a significant portion of the economy, largely due to lack of data on these companies, most research on FRF examines only public companies. The primary objective of this study is to determine how private company FRF is different from FRF in public companies. Our multivariate tests reveal that public companies have stronger anti-fraud environments, are more likely to have frauds that involve timing differences, tend to experience larger frauds, have frauds that involve a larger number of perpetrators, and are less likely to have frauds that are discovered by accident. Overall, it appears that the stronger anti-fraud environment in public companies leads public company FRF perpetrators to use less obvious fraud methods (i.e., timing differences) and to involve larger fraud teams to circumvent the controls. These public company frauds are larger than in private companies, and their larger size may make them more likely to be detected through formal means, rather than by accident. Based on the results, we encourage auditors and others to be particularly attuned to the unique risks of the public versus private setting.

scholarly journals A Retrospective Look at the Sarbanes-Oxley Act of 2002- Has it accomplished its original purpose?

2015 ◽  
Vol 31 (2) ◽  
pp. 585 ◽  
Author(s):  
Anthony Basile ◽  
Sheila Handy ◽  
Felisha N. Fret
Keyword(s):  
The United States ◽  
Regulatory Agencies ◽  
United States Congress ◽  
Publicly Traded ◽  
Private Companies ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Sarbanes Oxley ◽  
Policies And Procedures ◽  
Internal Framework

As a result of notable frauds including Enron, WorldCom and Waste Management, the United States Congress enacted the Sarbanes-Oxley Act of 2002 (SOX). The Act would forever change the accounting profession. After a little more than a decade, publicly traded companies have been able to create and implement policies and procedures to ensure compliance with the Act, specifically the provisions set forth in Section 404. Since all public companies have implemented SOX compliance together with other regulations imposed by the Internal Revenue Service and other regulatory agencies into their normal reporting routines, management of these companies have realized further benefits associated with SOX compliance. Because of these reported benefits many private companies have begun to voluntarily implement SOX-like policies and procedures into their own internal framework. This paper will discuss the perceptions of the enactment and implementation of the Act, the associated benefits derived from SOX compliance and reasons why private companies have begun voluntarily adopting SOX-like policiesprocedures and strategies.

Capital and Financial Strategies for Private Companies: Lessons from Their Publicly Traded Brethren

2018 ◽  
Keyword(s):  
Risk Management ◽  
Management Practices ◽  
Publicly Traded ◽  
Private Companies ◽  
Public Companies ◽  
Public Markets ◽  
Operational Information ◽  
Financial Strategies ◽  
Ongoing Evaluation ◽  
Do So

Most businesses monitor their sales, marketing, and supply chain strategies. However, the companies with the best governance and risk management also regularly evaluate their capital and financial plans, understanding and thinking ahead about their needs for liquidity, their mix of different types of funding, and the eventual need to return money to their investors. The exigencies of public markets, as well as the law, require public companies to carefully monitor their capital and financial strategies in this systematic way—and to make timely adjustments when this ongoing evaluation points out the need to do so. This necessity has created a process that well-run private companies would be wise to emulate. Accordingly, this article will explore how private companies adopt the governance and risk management practices of public companies to enhance their performance. More precisely, it will explore how they overcome the challenge of having little visibility into capital market conditions for private companies, a problem that public companies do not have because they must abide by regulations that mandate the disclosure of critical financial and operational information.

The Dodd-Frank Act and the Private Company Discount: An Empirical Investigation

2020 ◽  
Author(s):  
Peter L. Lohrey
Keyword(s):  
Empirical Investigation ◽  
Negative Impact ◽  
Purchase Price ◽  
Private Company ◽  
Private Companies ◽  
Public Companies ◽  
Significant Evidence ◽  
Public Firms ◽  
Academic Literature ◽  
Tax Court

There has been a great deal of criticism about the Dodd-Frank Act of 2010 (DFA) which focuses on the negative impact it had on small public companies. This study uses acquisition data to perform an empirical investigation into whether the DFA impacted the value of private companies. The results present statistically significant evidence that the purchase price discount for non-public firms was greater post-DFA. The evidence presents support for the opinion that the DFA was more harmful to private companies than it was to public companies. It also supports the existent academic literature, tax court, federal regulator and valuation practitioner views that private company acquisitions should include a discount for lack of marketability due to the illiquid nature of private companies.

scholarly journals Accounting choices in Brazil: identifying the characteristics of publicly traded companies that opted to maintain versus derecognise deferred assets

2012 ◽  
Vol 23 (58) ◽  
pp. 52-64
Author(s):  
Fernando Drago Lorencini ◽  
Fábio Moraes da Costa
Keyword(s):  
Financial Reporting ◽  
Transition Period ◽  
Firm Characteristics ◽  
Publicly Traded ◽  
Generally Accepted Accounting Principles ◽  
Publicly Traded Companies ◽  
Financial Reporting Standards ◽  
Accounting Choices ◽  
Final Sample ◽  
New Facility

The issuance of Brazilian Law 11.638/2007 is a critical step in the convergence of the Brazilian Generally Accepted Accounting Principles (GAAPs) towards International Financial Reporting Standards. After the law was implemented and later modified by Provisional Executive Order 449/2008 (converted into Law 11.941/2009), certain accounting choices were allowed during the transition period. The Brazilian GAAPs allowed for restructuring costs and costs related to opening a new facility to be recognised as assets. As a transitional provision, companies were allowed to choose between maintaining or eliminating these values. In this paper, we attempted to identify which company characteristics were associated with this accounting choice. The final sample consisted of Brazilian companies listed on the BM & FBOVESPA, and a logistic regression identified two characteristics. Participation in one of the three different corporate governance levels of the BM & FBOVESPA was associated with the choice to derecognise the deferred assets, while companies decided to maintain the deferred asset if it was relatively large. The empirical evidence reported here contributes to the literature by explaining the manner in which a set of firm characteristics is related to a firm's accounting choices.

scholarly journals Major government customer and management earnings forecasts

2020 ◽  
Vol 14 (1) ◽  
Author(s):  
Agnes C. S. Cheng ◽  
Wenli Huang ◽  
Shaojun Zhang
Keyword(s):  
Positive Impact ◽  
Earnings Forecasts ◽  
Price Impact ◽  
Management Earnings Forecasts ◽  
Publicly Traded ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Customer Base ◽  
The Us

Abstract This paper examines whether customer base composition in the US, that is, whether a firm’s major customers are government entities or publicly traded companies, affects the properties of its management earnings forecasts (MEFs). Using a sample of 1168 MEFs from 1998 to 2014, we find that firms whose major customers are government entities (i.e., government suppliers) issue more precise and more accurate MEFs than firms whose major customers are public companies (i.e., corporate suppliers). Moreover, when managers disclose negative information to the market, earnings forecasts issued by government suppliers have greater price impact than those issued by corporate suppliers. Collectively, our empirical results suggest that having major government customers has a positive impact on the quality of MEFs.

scholarly journals Privately-Held Companies: Legislation, Regulation, and Limited Dissemination of Financial Information

2019 ◽  
Vol 47 (4) ◽  
pp. 28
Author(s):  
Zoeanna Mayhook
Keyword(s):  
Financial Statements ◽  
Securities And Exchange Commission ◽  
Financial Information ◽  
Publicly Traded ◽  
Private Companies ◽  
Public And Private ◽  
Publicly Traded Companies ◽  
The Public ◽  
Disclosure Requirements ◽  
Privately Held

Publicly-traded companies have reporting and disclosure requirements set by the U.S. Securities and Exchange Commission (SEC), which includes the public disclosure of financial statements and an annual 10-K report. In contrast, privately-held companies most often do not meet the SEC filing requirements, and therefore, are not required to disclose financial information. For investors and business researchers, this can provide clear challenges for researching privately-held companies. This paper first highlights a sample of the significant legislation and rules affecting disclosure requirements of public and private companies. Then, it offers other government sources for company and industry financial information. Finally, it suggests further resources to educate business owners, investors, and business researchers.

scholarly journals Assessment of the Performance of Mergers: Revisiting Results after a Prolonged Period

2021 ◽  
Vol 92 ◽  
pp. 07047
Author(s):  
Jan Peta ◽  
Maria Reznakova
Keyword(s):  
Performance Indicators ◽  
Value Added ◽  
Labour Cost ◽  
Growth Strategy ◽  
Financial Indicators ◽  
Publicly Traded ◽  
Private Companies ◽  
Accounting Data ◽  
Publicly Traded Companies ◽  
Near Future

Research background: Mergers and acquisitions (M&As) have become a widespread tool for business growth strategy. Considering the developments after the previous financial crisis, a fresh wave of M&As is expected to appear in the near future. Investors will look for suitable businesses to consolidate their market position. Purpose of the article: The aim of this work is to assess the performance of completed mergers over a period of five years and compare the results with previous research in which we examined the success of mergers over a three-year period. Our goal was to find out if any differences in performance indicators occur and if these differences are significant. The results may offer potential indicators of merger success rate prediction. Methods: We focused our research on mergers of private companies (i.e. not publicly traded companies) in the Czech Republic. Our research sample contained 50 completed mergers. The mergers were divided into two groups – successful and unsuccessful – according to the sales and profit of the merged company. We calculated financial indicators for each group based on accounting data. We then used the Mann-Whitney U test to test the significance of the differences between the indicator values. Findings & value added: Several important performance indicators emerged. The most significant included production consumption to sales, the material cost to sales, receivables to sales, assets turnover and profitability ratios. The ratio labour cost to sales was replaced with the ratio value added to labour cost. Our research concludes that these indicators can be considered crucial.

scholarly journals Defining customer experience and measuring its impact on financial performance of US publicly traded companies

2020 ◽  
Author(s):  
Michele Bennett ◽  
Anthony Molisani
Keyword(s):  
Customer Loyalty ◽  
Business Performance ◽  
Customer Experience ◽  
Publicly Traded ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Confirmatory Factor ◽  
Net Promoter ◽  
Individual Variables ◽  
The Individual

Customer experience (CX) is an important contributor to business performance. Yet, studies vary in defining CX, variables and constructs, and measurement to performance. This study defined CX and the direct impact to market capitalization (MC) of US public companies. The CX definition combined Customer Experience Quality (CEQ) with Customer Satisfaction (CSAT), Customer Loyalty (CLY), and Net Promoter Score (NPS). Each dimension was measured to the extent to which they impact MC. The sample consisted of 1605 US customers of US publicly traded companies. Using correlation analysis, multiple linear regression, and confirmatory factor analysis, the individual variables of CEQ were positively and significantly correlated with MC and with each other. CEQ, CSAT, CLY, and NPS were also positively and significantly correlated with MC, and the holistic CX was predictive of MC. Companies can apply the insights of the study to improve their customer experience to deliver measurable business and shareholder value.

scholarly journals Non-executive reporting requirements for public companies

2009 ◽  
Vol 5 (2) ◽  
pp. 36-41
Author(s):  
Mark Rome
Keyword(s):  
United States ◽  
Value Added ◽  
The United States ◽  
Publicly Traded ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Executive Staff ◽  
Reporting Requirements

Non-Executive Reporting Requirements should empower non-executive staff of publicly traded companies with a structured process to communicate value-added information directly with analysts, investors and regulators on a recurring basis without fear of reprisal or reprimand. This paper analyses non-executive reporting requirements for public companies in the United States.

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