Choice between alternative routes to go public: backdoor listing versus IPO

Brown, Philip S.; Ferguson, Andrew; Lam, Peter

doi:10.4337/9781781955376.00034

Cited by 8 publications

(7 citation statements)

References 3 publications

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“…In emerging markets, a reverse merger is also a popular alternative for public offerings (Wu, ; Brown et al ., ; Carpentier et al ., ). For example, Brown et al .…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…In the literature, Brown et al . () show that firm characteristics and deal‐specific variables affect the choice between an IPO and one of several alternative routes. Further, among the alternatives, a reverse merger is the most common way for private firms to go public because they can be exempted from the complicated procedures of regular IPOs (Fältmars et al ., ; Floros and Sapp, ).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…For example, Brown et al . () suggest that there is an overabundance of listed shell firms on the ASX because sufficient numbers of junior exploration firms exist. Further, Jindra et al .…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…For example, Brown et al . () suggest that there are many reverse mergers in the Australian Stock Exchange (ASX). They argue that private firms' shareholders consider a reverse merger to be an important alternative way of going public because of its simplicity compared to an IPO.…”

Section: Introductionmentioning

confidence: 99%

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Ownership Structure and the Survival of Listed Firms: Evidence from Korean Reverse Mergers

Han

Kwon

2015

Asia-Pac J of Fin Stud

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We examine the impact of ownership structure on the post-performance of Korean firms that go public as the result of a reverse merger. Although a reverse-merger announcement has positive cumulative abnormal returns (CARs), we find that 24.8% of reverse-merged firms become delisted because of poor post-performance, seemingly due to the agency problem. We also find that expected changes in management after a reverse merger positively affect the CARs of public target firms around the time of the reverse-merger announcement. However, the post-performance of reverse-merged firms is relatively poor compared to firms that undertake regular initial public offerings. Further, we find that ownership concentration alleviates poor performance following a reverse merger.

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“…In emerging markets, a reverse merger is also a popular alternative for public offerings (Wu, ; Brown et al ., ; Carpentier et al ., ). For example, Brown et al .…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…For example, Brown et al . () suggest that there is an overabundance of listed shell firms on the ASX because sufficient numbers of junior exploration firms exist. Further, Jindra et al .…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Ownership Structure and the Survival of Listed Firms: Evidence from Korean Reverse Mergers

Han

Kwon

2015

Asia-Pac J of Fin Stud

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“…Arellano-Ostoa and Brusco 2002, Brau, Francis and Kohers 2003, Gleason, Rosenthal and Wiggins 2005, Adjei, Cyree and Walker 2008, Brown, Ferguson and Lam 2010, Floros and Shastri 2012, and the comparison of the post-event performance of RM firms and IPO firms(Gleason, Jain and Rosenthal 2006, Asquith and Rock 2011) 15 .…”

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confidence: 99%

Three essays on corporate finance

Pang¹

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We examine the effect of CEO severance pay on the likelihood of CEO turnover. We find that severance pay reduces both the frequency and performance sensitivity of turnover. Moreover, we find that these reductions are especially pronounced when, conditional on poor past performance, there remain considerable uncertainties about CEOs' competence. Our findings suggest that severance pay protects CEOs against the risk of dismissal when performance is poor but may only be temporarily so. In addition, we show that variations in the quality of corporate governance do not significantly alter the relation between severance pay and turnover rate, suggesting that the protection effect of severance pay is orthogonal to the effects of corporate governance on CEO turnover.

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Reverse mergers and stock price crash risk: evidence from China

Cheng

Liu

Xie

2022

JAL

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PurposeDoes the choice of listing process matter in determining a firm's future crash risk? It is understood that the main function of an equity market is to provide price discovery, however, it is not clear whether the choice of listing methods would matter to the shareholders' wealth in the long term. We are the first to answer this question by utilising a hand-collected dataset that identifies all companies that went public via reverse merger (RM) in a growing emerging market.Design/methodology/approachUsing hand-collected data from 2000 to 2018 in China, we follow the literature to construct two crash risk measures for RM and IPO firms. Our main analysis is performed using OLS regressions on the full sample as well as a sample using Propensity Score Matching. Our results hold with a number of robustness checks.FindingsWe find that reverse merger (RM) firms exhibit higher future stock price crash risk than initial public offering (IPO) firms. This relationship is more predominant in non-state-owned enterprises, and we find weak evidence suggesting such relationship weakens as firms stay longer in the market. There is no significant difference in future stock price crash risk between RM firms listed during IPO suspension periods and normal IPO firms.Originality/valueWe are the first to study the choice of listing method and its impact on firms' future stock price crash risk.

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Choice between alternative routes to go public: backdoor listing versus IPO

Cited by 8 publications

References 3 publications

Ownership Structure and the Survival of Listed Firms: Evidence from Korean Reverse Mergers

Ownership Structure and the Survival of Listed Firms: Evidence from Korean Reverse Mergers

Three essays on corporate finance

Reverse mergers and stock price crash risk: evidence from China

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