The determinants and survival of reverse mergers vs IPOs

Abstract

Reverse mergers, Takeovers, G34,

Untangling the relationship between new venture internationalization and performance

“…Consistent with prior research, survival was determined by whether or not the stock was delisted due to negative reasons within 3 years following the IPO year (e.g., Adjei et al 2008;Fischer and Pollock 2004). Examples of negative reasons include liquidation (codes 400-490) or dropped for other reasons such as being delinquent (codes 520-590).…”

Accrual-based and real activity earnings management at the back door: Evidence from Chinese reverse mergers

“…The lack of underwriter monitoring and less stringent regulation requirements in the process of reverse acquisition increase earnings management opportunity in Chinese RM firms (Feldman, 2009;Lee and Masulis, 2011). Moreover, a typical RM firm tends to have relatively low fundamental quality and a high degree of information asymmetry (Adjei et al, 2008;Gleason, 2005). Compared with regular US firms and other Chinese US-listed firms, Chinese RM firms with inferior fundamentals have higher incentives and greater opportunity to manage earnings in the years around reverse acquisition to boost stock prices, sustain overvaluation or increase the probability of raising capital in the future.…”

“…Using simulation analysis, they show that even modest correlation between these volatility metrics and the partitioning variable (e.g., the indicator of Chinese RM firms) severely increases the risk of incorrectly rejecting the null hypothesis. In fact, RMs, particularly Chinese RM firms, are found to have higher debt and higher volatility in fundamentals (Adjei et al, 2008;Chu et al, 2014;Gleason et al, 2005;Lee et al, 2013).…”

Does pedigree matter? Earnings quality of U.S. listed domestic firms via reverse mergers

“…To mitigate the potential self-selection bias, we employ the Heckman (1976) two-stage procedure. Adjei et al (2008) examine the determinants of reverse mergers versus IPOs, and we use their model in our first stage of the Heckman procedure to estimate the inverse Mills ratio. Specifically, we estimate the following probit model to calculate the inverse Mills ratio:…”