Two Essays on Alternative Mechanisms to Going Public

Abstract

This dissertation addresses the reasons why private companies that have decided to go public use the alternative reverse merger path instead of the traditional initial public offering. We test the importance of information asymmetry for the decision of domestic and foreign private company owners to go public in the US utilizing the reverse merger path. To measure information asymmetry we use size, profitability, development stage, expenses and financing variables. We conclude that private companies choosing the reverse merger path are highly information asymmetric since reverse merger deals require no offering to be conducted at the consummation of the deal making these companies less reliant on a wide public investor base. This dissertation consists of five Chapters: Chapter One reviews going public and cross-listing literature. Chapter Two presents our empirical findings of domestic reverse mergers-penny stock initial public offerings comparison. Chapter Three analyzes similarities and differences of domestic and foreign reverse mergers. Chapter Four expands our analysis to the international level. Chapter Five states our conclusions.

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