Financial Constraints and Investment Thirst in Chinese Reverse Merger Companies

33 Pages Posted: 27 Mar 2018

See all articles by Zijian Cheng

Zijian Cheng

Shandong University - Department of Accounting

Grant Fleming

Continuity Capital Partners

Zhangxin Frank Liu

The University of Western Australia Business School

Date Written: December 2017

Abstract

Using a hand‐collected data set of Chinese reverse mergers (RM) between 2006 and 2015, we find that financial constraints are more serious and investment thirst higher for RM companies as compared with initial public offering (IPO) companies. For state‐owned enterprises (SOEs), listing via a RM or an IPO does not impact the level of financial constraints post‐listing, while SOE RMs have higher investment thirst than SOE IPOs. By contrast, non‐SOE RMs are under more financial constraints and have higher investment thirst than non‐SOE IPOs. These differences are not presented during the 4 Trillion Yuan stimulus period between 2008 and 2010.

Keywords: China, Financial Constraints, Initial public offering, Investment Thirst, Reverse Mergers, State‐Owned Enterprises

Suggested Citation

Cheng, Zijian and Fleming, Grant and Liu, Zhangxin (Frank), Financial Constraints and Investment Thirst in Chinese Reverse Merger Companies (December 2017). Accounting & Finance, Vol. 57, Issue 5, pp. 1315-1347, 2017, Available at SSRN: https://ssrn.com/abstract=3150013 or http://dx.doi.org/10.1111/acfi.12324

Zijian Cheng (Contact Author)

Shandong University - Department of Accounting

27 Shanda Nanlu
South Rd.
Jinan, Shandong 250100
China

Grant Fleming

Continuity Capital Partners

GPO Box 314
Canberra, Australian Capital Territory 2601
Australia

Zhangxin (Frank) Liu

The University of Western Australia Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

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