Doctoral Student

Kyle Travis Welch

Kyle Welch is a Doctoral Candidate at Harvard Business School with research interests focused on understanding governance, management incentives and valuation.  He has a particular interest in these topics as they relate to the context of illiquid institutional investing (e.g., Private Equity and Venture Capital). 

Kyle’s prior industry experience provides a unique lens on his research and teaching interests. Prior to joining Harvard, he worked as an institutional investor managing Stanford University’s endowment with the Stanford Management Company.  Prior to joining Stanford, he also worked at Standard & Poor’s Valuation Consulting group.

Working Papers

  1. Private Equity's Diversification Illusion: Economic Comovement and Fair Value Reporting

    This study examines how accounting has informed private equity diversification claims and demand for private equity investments. Despite research showing private equity lacks portfolio diversification benefits, those marketing private equity assets continue to emphasize its diversification value, and demand for private equity investments has surged. Exploiting the change in international accounting, I show that returns provided by private equity firms understate the economic comovement between private equity and market returns, creating a diversification illusion. I find that private equity funds that adopted redefined fair value accounting reported returns with increased market beta and correlations. Additionally, I find that abnormal returns to private equity firms disappear after adopting fair value standards. In contrast to findings from public market research showing improved disclosure reduces the cost of capital, private equity firms that implement fair value standards encounter increased costs in accessing capital. This result is consistent with fair value reporting informing diversification benefits, improving resource allocation and mitigating agency concerns.

    Keywords: private equity; Fair Value; access to capital; IAS 39; FAS No. 157; FASB; IASB; ASC 820; covariance risk; accounting beta; cost of capital; Accounting; Private Sector; Valuation; Corporate Finance; Asset Management; Cost of Capital; Private Equity; Accounting Industry; Financial Services Industry; Europe; North and Central America;

  2. Top Executive Background and Financial Reporting Choice

    We study the role of executive functional background in explaining management discretion in financial reporting. Taking goodwill impairment as our reporting setting, we focus on top executives (CEOs and CFOs) whose employment history includes experience in investment banking, private equity, venture capital or management consulting, as we expect these executives to have unique human capital and reputation concerns with respect to acquisitions and valuation modeling related to fair-value reporting. On average, we document that CFOs with prior transaction experience impair goodwill more frequently and in smaller amounts than other executives. Further investigation suggests that CFOs with prior transaction experience report goodwill that is more value relevant. This is consistent with CFO valuation expertise helping impair goodwill in a more informative manner. In contrast, CEOs with prior transaction experience appear to be subject to agency conflicts that affect their propensity to impair goodwill. Overall, our results not only suggest that executive functional background is a significant explanatory factor of financial reporting discretion, but also that a better understanding of its effect relies upon analyses of specific settings and predictions grounded in upper echelons theory and agency theory.

    Keywords: Financial Reporting; Goodwill Accounting; Experience and Expertise; Decision Choices and Conditions; Managerial Roles; Agency Theory;


    Brochet, Francois, and Kyle Travis Welch. "Top Executive Background and Financial Reporting Choice." Harvard Business School Working Paper, No. 11-088, February 2011. (Revised November 2011.)

Cases and Teaching Materials

  1. Ultimate Fighting Championship: License to Operate (A)

    The case describes the challenges that Ultimate Fighting Championship faced as a result of regulatory opposition and loss of the license to operate. The genesis of the business idea, the subsequent growth, and the fall of the UFC are described. The case concludes with Lorenzo Fertitta deciding whether to invest in the company.

    Keywords: Governance Compliance; Ethics; Judgments; Investment; Sports Industry; Entertainment and Recreation Industry;


    Serafeim, George, and Kyle Welch. "Ultimate Fighting Championship: License to Operate (A)." Harvard Business School Case 112-011, July 2011. (Revised November 2012.)

Other Publications and Materials

  1. Top Executive Background and Corporate M&A: The Case of Former Investment Bankers

    We study the M&A activity of firms with top executives whose employment history includes experience in a Wall Street firm, especially those with investment banking background ("IB executives"). In terms of strategy, controlling for firm-level effects, we document that firms with IB executives (and directors) engage in more divestitures. We also find that the presence of an IB CFO—but not CEO—is associated with more acquisitions. Next, in terms of accounting choice, we find that IB executives are more likely to impair goodwill only when their reputation concerns are likely to be low. Finally, in terms of performance, we find that market reactions to transaction announcements vary with the presence of a former Wall Street executive primarily when (s)he is an alumnus of one of the advisors on the deal. Overall, our results suggest that the influence of Wall Street executives on their firm's M&A stems not only from their functional background but also from their reputation concerns and social networks.

    Keywords: Managerial Roles; Reputation; Investment Banking; Financial Reporting; Mergers and Acquisitions; Social and Collaborative Networks; Goodwill Accounting; Power and Influence; Banking Industry;


    Brochet, Francois, and Kyle Welch. "Top Executive Background and Corporate M&A: The Case of Former Investment Bankers." December 2010.