Ownership Matters? The Impact of Private Equity and Venture Capital on Accounting Choices and Firm Performance in Europe

Private equity (PE) and Venture capital (VC) investors play fundamentally different roles in their portfolio companies. We argue that these differences should translate into distinct effects on firms’ financial performance and accounting quality. Using a dynamic difference-in-differences approach on a panel of unlisted European companies, we examine changes in key financial indicators and accounting quality proxies during the three years preceding and following the investment. The analysis shows that private-equity-backed firms experience clear short-term improvements in performance, higher total assets, EBITDA margin, and ROA, while accounting quality remains unaffected. Venture-capital-backed firms, by contrast, display no significant changes on these dimensions over the observed period. Our study contributes to the understanding of how private equity and venture capital differ in their investment approaches and strategic focus, and how these differences translate into distinct outcomes for portfolio firms.