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Title: Private Company Valuations by Mutual Funds
Authors: Agarwal, Vikas
Barber, Brad
Cheng, Si
Hameed, Allaudeen 
Yasuda, Ayako
Keywords: Mutual funds
Venture capital
Private valuation
Stale prices
Financial fragility
Issue Date: 6-Jun-2019
Publisher: Oxford University Press (OUP)
Citation: Agarwal, Vikas, Barber, Brad, Cheng, Si, Hameed, Allaudeen, Yasuda, Ayako (2019-06-06). Private Company Valuations by Mutual Funds. American Finance Association Conference. ScholarBank@NUS Repository.
Abstract: Mutual fund families set and report values of their private startup holdings, which affect the fund net asset value (NAV) at which investors buy/sell fund shares. We test three hypotheses related to the valuation practice: (i) information cost/access, (ii) litigation risk, and (iii) strategic NAV management. Consistent with (i), families with larger PE holdings and/or stronger information access update valuations more frequently in the absence of public information releases, their updates co-move less with other families, and their fund returns jump less at follow-on financings. We find no support for hypotheses (ii) or (iii). We also find that high-PE-exposure funds are subject to greater financial fragility.
Source Title: American Finance Association Conference
ISSN: 1572-3097
DOI: 10.1093/rof/rfac037
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