Are reverse merger companies more likely to be delisted? : evidence from US-listed Chinese companies

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Are reverse merger companies more likely to be delisted? : evidence from US-listed Chinese companies

 

Author: Li, Lok Yan
Title: Are reverse merger companies more likely to be delisted? : evidence from US-listed Chinese companies
Degree: M.Sc.
Year: 2013
Subject: Going public (Securities)
Corporations -- China -- Finance.
Hong Kong Polytechnic University -- Dissertations
Department: School of Accounting and Finance
Pages: vii, 64 leaves : ill. ; 30 cm.
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2557489
URI: http://theses.lib.polyu.edu.hk/handle/200/6868
Abstract: I was prompted to carry out a detailed research on the nature of Chinese reverse merger (CRM) companies against the background that there is an increasing number of US-listed CRM companies being involved in accounting scandals and have their stocks being delisted for the major U.S. stock exchanges in recent years. In this paper, I compare the characteristics of CRM firms and IPO firms. Also, I would like to find out whether CRM firms are more likely to be delisted. I examine 496 CRM firm-year observations from the major stock exchanges in the U.S. over the period of 2008 to 2010. The first finding is that the quality of CRM companies is lower than those Chinese companies listed via Initial Public Offer (IPO). The firms' quality is measured in terms of capital size, sales growth, turnover and return on assets. Secondly, compared with other listing methods, companies going public via CRM are more likely to be delisted when controlling the variables of firm size and the board characteristics. The evidence also suggests that CRM firms which engage Big-4 auditors can help to improve the financial reporting quality and hence less likely to be delisted. However, there is no strong evidence to support the assertion that the quality of corporate governance in CRM firms is poorer than IPO firms.

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