Going Public in China: Reverse Mergers versus IPOs

Charles Lee, Yuanyu Qu and Tao Shen

Research Papers from Stanford University, Graduate School of Business

Abstract: We study firms' choice to go public through reverse mergers (RMs) versus initial public offerings (IPOs) in a regime with strict entry regulations. Using a manually-assembled data set from China, we show that Chinese RM firms are larger and more profitable than IPO firms prior to public listing. Chinese RM firms also have superior post-listing performance, in terms of both operations and stock returns, compared to IPOs matched on industry and size. Unlike IPOs, Chinese RM firms do not underperform the market in the long run. These results are in sharp contrast to the evidence on RMs from developed countries. We trace these differences to China's stringent IPO policies, which appear to block even high-quality firms from accessing public markets.

JEL-codes: G12 G18 G20 G34 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-cfn, nep-cna and nep-tra
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Citations: View citations in EconPapers (15)

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Journal Article: Going public in China: Reverse mergers versus IPOs (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3655

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