Financial reporting quality of Chinese reverse merger firms: The reverse merger effect or the weak country effect?

Kun Chih Chen, Qiang Cheng, Ying Chou Lin, Yu Chen Lin, Xing Xiao

研究成果: Article

24 引文 斯高帕斯(Scopus)

摘要

In this paper, we examine why Chinese reverse merger (RM) firms have lower financial reporting quality than U.S. IPO firms. We find that the financial reporting quality of U.S. RM firms is similar to that of matched U.S. IPO firms, but Chinese RM firms exhibit lower financial reporting quality than Chinese ADR firms. We also find that Chinese RM firms exhibit lower financial reporting quality than U.S. RM firms. These results indicate that the use of the RM process is associated with poor financial reporting quality only in firms from China, where legal enforcement and investor protection are weak. In addition, we find that compared with Chinese ADR firms, Chinese RM firms have weaker bonding incentives (as measured by CEO turnover-performance sensitivity) and poorer corporate governance. These factors, in turn, contribute to the lower financial reporting quality of Chinese RM firms. Overall, our results suggest that the less scrutinized RM process allows the Chinese firms with weak bonding incentives and poor governance to gain access to U.S. capital markets, resulting in poor financial reporting quality.

原文English
頁(從 - 到)1363-1390
頁數28
期刊Accounting Review
91
發行號5
DOIs
出版狀態Published - 2016 九月

    指紋

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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