 Reverse merger audit fee premium: Evidence from ChinaZijian Cheng, Liu, Zhangxin (Frank), Isabel Zhe Wang and Xingju Zhao International Review of Financial Analysis, 2024, vol. 94, issue C Abstract: We examine the impact of listing via a reverse merger (RM) on audit fees, which can serve as an indicator of a firm's perceived risk. Using a manually assembled dataset of Chinese companies from 2010 to 2019, we find that RMs tend to pay higher audit fees than their counterparts who undertake an initial public offering (IPO), primarily due to the increased risk of corporate litigation and financial misstatement. Furthermore, RMs with performance commitments are subject to even higher fees, and this audit fee premium is particularly evident during the performance commitment period. Our analysis shows that the audit fee premium for RMs is lower in state-owned enterprises, firms with robust internal control, and those operating under weaker oversight. These findings highlight the perceived risks associated with RMs in China and offer insights into why RMs frequently underperform following their listing in the Chinese market Keywords: Reverse mergers; IPOs; Audit fee; Performance commitment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:94:y:2024:i:c:s1057521924002503 DOI: 10.1016/j.irfa.2024.103318 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.