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

Chen, Yu; Soileau, Jared S.

doi:10.1016/j.jaccpubpol.2014.08.003

Cited by 10 publications

(8 citation statements)

References 54 publications

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“…Using a host of proxies (such as manipulated accruals, manipulated operating income, real earnings management, accrual profit estimation error and other indicators) to capture the level of earnings quality, and adopting the Heckman model to control for self-selection problems, they find robust evidence that the earnings quality of RM-listed firms is poorer than that of IPO-listed companies. Similar to Chen and Soileau (2014), Pollard (2015) finds that RM-listed firms exhibit lower financial reporting quality than IPO-listed firms, with the difference being attenuated by the presence of institutional investors in RM-listed firms. Furthermore, Chen, Ke, Wu and Yang (2016), Chen, Cheng, Lin, Lin and Xiao (2016) focus on how geographical location, auditor quality and the presence of equity financing affect the earnings quality of US RM-listed companies.…”

Section: Literature Reviewmentioning

confidence: 92%

“…The third line of studies focuses on the quality of the RM-listed companies' accounting information. Chen and Soileau (2014) compare the earnings quality of IPO-listed companies with RMs listed in the US stock market. Using a host of proxies (such as manipulated accruals, manipulated operating income, real earnings management, accrual profit estimation error and other indicators) to capture the level of earnings quality, and adopting the Heckman model to control for self-selection problems, they find robust evidence that the earnings quality of RM-listed firms is poorer than that of IPO-listed companies.…”

Section: Literature Reviewmentioning

confidence: 99%

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A survey of reverse mergers in the Chinese stock market

Xin

Wong³

2019

CFRI

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Purpose The purpose of this paper is to provide an introduction to the reverse mergers (RMs) conducted in the Chinese stock market by summarizing the regulatory system, surveying the literature on RMs and analyzing the major characteristics of 161 RM cases. Design/methodology/approach This paper introduces the characteristics and evolution of the regulatory framework governing RM activity in China. Then the paper reviews relevant academic studies on the RMs in China and other countries. Finally, the paper identifies and discusses the major characteristics of 161 RM cases in the Chinese stock market from 2006 to 2016. Findings Private companies that go public via RMs in China not only have superior asset quality but also demonstrate good accounting and stock price performance after listing, and these results are unlike those of studies on the quality of RMs in other countries. Research limitations/implications This paper is based on a survey of 161 RM cases in China’s stock market, with the major characteristics of the RMs being identified and analyzed. The limitations of previous studies and suggestions for further research are discussed. Originality/value This paper suggests that the relative superior performance of RMs in the Chinese stock market is caused by the interplay of market forces and regulatory oversight. The Chinese regulator’s pragmatic and flexible approach plays an important role in formulating regulatory policies that respond to the changing macroeconomic environment and financial markets.

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Section: Literature Reviewmentioning

confidence: 92%

Section: Literature Reviewmentioning

confidence: 99%

A survey of reverse mergers in the Chinese stock market

Xin

Wong³

2019

CFRI

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“…However, the results were inconclusive as to whether reverse mergers are value-increasing events for shell companies. Chen and Soileau (2014) on comparing the earnings quality of US-based domestic firms extended the literature on reverse mergers by finding that they have lower earnings quality compared with IPO firms during the period from 1997 to 2011. Lee et al (2015) added to the knowledge of performance, financial health, benefits and disadvantages of reverse mergers by comparing the after-merger return performance of US control firms with that of Chinese reverse mergers.…”

Section: Shell Companies and Their Legitimate Usesmentioning

confidence: 96%

“…The use of publicly-listed shell companies by private companies to go public is called reverse mergers. A substantial amount of literature exists examining the use of shell companies for reverse mergers, and the benefits as well as the associate disadvantages (Aydogdu et al, 2007;Chen et al, 2016;Chen and Soileau, 2014;Floros and Sapp, 2011;Gleason et al, 2005;Lee et al, 2015;Poulsen and Stegemoller, 2008;Semenenko, 2011;Sjostrom, 2008). Table VI provides a snapshot of the research on legitimate uses of shell companies.…”

Section: Shell Companies and Their Legitimate Usesmentioning

confidence: 99%

“…The performance of shell companies is irrelevant to a private firm. They seek a shell company with a clean history and a quick path to merger The expected reward to investors from a shell reverse merger is justified by the growth of shell firms for reverse merger Chen and Soileau (2014) Examine the earnings quality of US domestic firms that access capital markets via a reverse merger compared to those via initial public offers…”

Section: Illicit Uses Of Shell Companiesmentioning

confidence: 99%

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A review of money laundering literature: the state of research in key areas

Tiwari

Gepp

Kumar

2020

PAR

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Purpose:The purpose of this study is to review the literature on money laundering and its related areas. The main objective is to identify any gaps in the literature and direct attention towards addressing them.Design/Methodology/Approach: A systematic review of the money laundering literature was conducted with an emphasis on the Pro-Quest, Scopus and Science-Direct databases. Broad research themes were identified after investigating the literature. The theme about the detection of money laundering was then further investigated. The major approaches of such detection are identified as well as research gaps that could be addressed in future studies. Findings:The literature on money laundering can be classified into the following six broad areas: (i) anti-money laundering framework and its effectiveness, (ii) the effect of money laundering on other fields and the economy, (iii) the role of actors and their relative importance, (iv) the magnitude of money laundering, (v) new opportunities available for money laundering and (vi) detection of money laundering. Most studies about the detection of money laundering have focused on the use of innovative technologies, banking transactions, or real estate and trade-based money laundering. However, the literature on the detection of shell companies being explicitly used to launder funds is relatively scarce.Originality/Value: This paper provides insights into an area related to money laundering where research is relatively scant. Shell companies incorporated in the UK alone were identified to be associated with laundering 80 billion pounds of stolen money between 2010 and 2014. The use of these entities to launder billions of dollars as witnessed through the laundromat schemes and several data leaks clearly indicate the need to focus on illicit financial flows through such entities.

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