Wednesday, September 18, 2013

Chinese reverse mergers are not toxic: Study

Chinese reverse mergers are not toxic: Study

However, the study found that Chinese reverse mergers outperformed their peers from inception through 2011, even after including most of the firms accused of accounting fraud.
"Despite the negative publicity (some from short sellers), we find little evidence that U.S. capital markets have been harmed by the admission of CRMs," the study authors wrote.
According to the study, while reverse merger companies are speculative in nature and are prone to bankruptcy, Chinese firms tend to be more mature and less speculative than their U.S. peers.
"They are larger, less levered, more profitable, less likely to have a qualified audit opinion, and more likely to be at the Growth or Mature stage of the business life cycle," the study said.

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