Review of Quantitative Finance and Accounting

, Volume 52, Issue 1, pp 159–196 | Cite as

Are investors always compensated for information risk? Evidence from Chinese reverse-merger firms

  • Yenn-Ru Chen
  • Mi-Hsiu ChiangEmail author
  • Chia-Hsiang Weng
Original Research


Using a data sample of 93 Chinese reverse-merger (CRM) firms listed in the U.S. over the period from 2000 to 2011, we find supporting evidence of poorer financial reporting quality exhibited by CRM firms relative to their respective US counterparts. Our main result indicates that while poor financial reporting quality induces information risk/asymmetry, higher (lower) information risk fails to be associated with higher (lower) expected returns. In contrast with prior studies that document information risk as non-diversifiable and a priced risk factor, the value relevance of the CRM firms’ financial reporting quality, in terms of information asymmetry-based premiums, is found to be remote.


Information risk Financial reporting quality Reverse mergers Valuation 

JEL Classification

G14 G34 M41 


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Yenn-Ru Chen
    • 1
  • Mi-Hsiu Chiang
    • 1
    Email author
  • Chia-Hsiang Weng
    • 2
  1. 1.National Chengchi UniversityTaipeiTaiwan
  2. 2.Hong Kong Polytechnic UniversityKowloonHong Kong

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