The Effect of Corporate Governance on Post Reverse Merger Survival

In this paper, we examine how firm financial conditions and governance characteristics affect reverse mergers’ survival. Using a sample of reverse mergers that took place in the United States during the 1997–2009 period, we find that firms with better corporate governance are more likely to survive after a reverse merger. In particular, CEO ownership, staggered board dummy, and ven- ture dummy have a positive association with reverse merger survival. We also show a concave rela- tion between the average board tenure and the probability of reverse merger survival. In contrast, most of the firm characteristic variables have an insignificant relationship with reverse merger sur- vival. Our results suggest that the survivability of reverse mergers relies more on the presumed value-enhancing governance characteristics than on the financial conditions of the merging firms.