Does Foreign Company’s Shortcut to Wall Street Cut Short Their Financial Reporting Quality? Evidence from Chinese Reverse Mergers

Sneaking in the back door? An evaluation of reverse mergers and IPOs

“…A number of contemporaneous studies focus on Chinese reverse mergers. Most relevant to my study , Chen et al (2012) and Givoly et al (2012) find evidence of lower financial reporting quality at Chinese reverse merger firms relative to U.S reverse merger firms and other matched U.S. firms.…”

“…Another contemporaneous study, Chen et al (2012), compares the financial reporting quality of Chinese reverse merger firms to various control groups (matched U.S. firms, Chinese…”

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

“…Section 7 provides a summary of our conclusions and limitations of this study. Chen et al (2012) find that Chinese firms that go public in the U.S. via RMs have lower financial reporting quality and are more likely to restate their financial statements than other U.S. IPO companies. Givoly et al (2012) compare the earnings quality of foreign RM firms against U.S. domestic firms within the same industries.…”

“…We control for these variables in our research design. We also examine discretionary revenues and real activities earnings management, which Chen et al (2012) do not examine. Stubben (2006Stubben ( , 2010 find that revenue models are less biased, better specified, and more powerful than commonly used accrual models.…”

Short sellers’ accusations against Chinese reverse mergers: Information analytics or guilt by association?

“…Relevant studies that directly examine the accounting quality of CRMs also provide evidence of short sellers' sophistication. Chen et al (2012) argue that CRMs exhibit lower financial reporting quality than US RM firms.…”