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

• Main Authors: CHEN, Kun-chih, CHENG, Qiang, YING, Chou Lin, YU, Chen Lin, Xin, Xiao
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: Accounting; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/943; http://aaahq.org/AM2012/abstract.cfm?submissionID=3118
• Institution: Singapore Management University

Compared with other companies listed on the major stock exchanges, Chinese Reverse Merger (CRM) companies suffer inferior financial reporting quality and are more likely to restate their financial statements. Subsequent tests suggest that the financial reporting quality of the US-listed Chinese companies may correlate with the listing methods they choose. Lastly, we explore potential regulatory vehicles that can be used to improve the financial reporting quality of US-listed Chinese companies in the light of certain transaction and firm characteristics. We find evidence consistent with large auditors and the seasoning requirement help improve the financial reporting quality of CRM companies.