Cross-Border Reverse Mergers: Causes and Consequences

51 Pages Posted: 22 Dec 2012 Last revised: 25 Sep 2013

See all articles by Jordan I. Siegel

Jordan I. Siegel

University of Michigan

Yanbo Wang

National University of Singapore (NUS) - NUS Business School

Date Written: September 24, 2013


We study non-U.S. companies that have used reverse mergers as a means to adopt U.S. corporate law (and sometimes U.S. securities law as well). Early adopters of cross-border reverse mergers and those firms that hired a Big Four auditor exhibited superior corporate governance outcomes. Later adopters of cross-border reverse mergers were likely to strategically mimic the early entrants only to gain access to U.S. capital markets — that is, they took some governance actions but not others — and are shown to be likely to have worse corporate governance outcomes over time. Firm-level origins in China initially appears to be a significant negative determinant of at least some corporate governance outcomes, but the variable loses its statistical power when examining the most comprehensive data set on cross-border reverse mergers yet assembled and when including a battery of relevant control variables. Adoption of Nevada’s corporate law is associated with some of the most serious restatements involving real corporate governance and data manipulation problems. In summary, the evidence supports the existence of strategic mimicry, which the capital market did not fully discern for many years. It also supports the explanatory power of reputational bonding to explain the fact that adoption of U.S. institutions can be used either to build reputation or to exploit relatively weak U.S. cross-border law enforcement.

Suggested Citation

Siegel, Jordan I. and Wang, Yanbo, Cross-Border Reverse Mergers: Causes and Consequences (September 24, 2013). Harvard Business School Strategy Unit Working Paper No. 12-089, Available at SSRN: or

Jordan I. Siegel (Contact Author)

University of Michigan ( email )

Ann Arbor, MI
United States

Yanbo Wang

National University of Singapore (NUS) - NUS Business School ( email )

Mochtar Riady Building #6-40
15 Kent Ridge Drive
Singapore, 117592

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