In our paper, Financial Reporting Quality of U.S. Private and Public Firms, forthcoming in The Accounting Review, we use a new database that contains accounting data for a large sample of U.S. private firms and provide an investigation of financial reporting quality (FRQ) of U.S. private versus public firms. Private firms are an important source of economic growth in the United States and elsewhere. In the aggregate, non-listed firms have about four times more employees, three times higher revenues, and twice the amount of assets than do listed firms (Berzins, Bøhren, and Rydland 2008). In 2008, Forbes reported that the 441 largest private companies in the United States accounted for $1.8 trillion in revenues and employed 6.2 million people. Despite their obvious importance to the U.S. economy, there is limited research on private firms in general, and almost no prior research related to the financial reporting quality (FRQ) of such firms.

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An important task for boards is to oversee executive compensation. The effectiveness of boards in carrying out this monitoring responsibility, however, is widely debated. In the paper, The Effect of Disclosure on the Pay-Performance Relation, forthcoming in the Journal of Accounting and Public Policy, we argue that disclosure improves board effectiveness. First and as a general point, disclosure can improve transparency, which facilitates the monitoring of management and hence causes managers to act more in the interests of shareholders. Such monitoring is potentially valuable since managers will not always act in the best interest of shareholders.

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