Reverse Mergers and Earnings Quality

Kathryn Schumann, James Madison University
Chu Chen, University of Texas at El Paso
Giorgio Gotti, University of Texas at El Paso


We test for differences in financial reporting quality between companies that went public through a reverse merger (RM) and other public companies. Moreover we test whether audit quality (Big 4), foreign incorporation, seasoned equity offering (SEO) play a role in the earnings quality of RM firms, above and beyond reverse mergers.