We study the effect of reverse mergers (RMs) on audit fees in China. Using a manually assembled data set from 2010-2019, we find that RMs pay higher audit fees than their IPO counterparts due to increased risks of corporate litigation and financial misstatement. RMs with performance commitments...

We examine the impact of listing via a reverse merger (RM) on audit fees, which can serve as an indicator of a firm’s perceived risk. Using a manually assembled dataset of Chinese companies from 2010-2019, we find that RMs tend to pay higher audit fees than their counterparts who undertake an...