Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules
68 Pages Posted: 18 May 2015 Last revised: 7 Aug 2019
There are 2 versions of this paper
Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules
Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules
Date Written: July 17, 2017
Abstract
This paper uses three alternating changes in hedge fund regulation to study whether regulation reduces hedge funds’ misreporting, and, if so, why regulation is effective. Relative to public companies, hedge fund regulation is relatively light. Much of the regime is a “comply-or-explain” regime that allows funds to forego compliance with governance rules, providing that they disclose their lack of compliance. The results show that regulation reduces misreporting at hedge funds. Further analysis suggests that the disclosure requirements led funds to make changes in their internal governance, such as hiring or switching the fund’s auditor, and that these changes induced funds to report their financial performance more accurately.
Keywords: Mandatory disclosure, hedge funds, SEC regulation, financial misreporting, auditing
JEL Classification: G28, D78, K20, K42
Suggested Citation: Suggested Citation