A Test of IPO Theories Using Reverse Mergers
34 Pages Posted: 11 Jan 2011 Last revised: 14 Nov 2011
Date Written: October 28, 2011
Reverse mergers are an alternative method to IPOs for going public and announcement day price reaction to reverse mergers is comparable to the initial day price reaction to IPOs. Most of the academic theories developed thus far to explain the market’s reaction to IPOs, however, are not applicable to reverse mergers. Using reverse mergers as an out-of-sample test on these IPO theories suggests most of them are invalid.
Keywords: IPO, Reverse Mergers
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation