Reverse takeover (also called reverse merger) is an alternative, but less costly method of going public to an IPO. It happens when a private firm acquires a public firm and takes control of the new firm by retaining the public listing. This is a combination of merger and going public processes, therefore the success of the reverse mergers can be affected by many conditions and factors. There are a few papers that have examined the financial conditions and the wealth effects of reverse mergers; however, this paper investigates the survivability of reverse mergers in terms of their combined governance characteristics. A sample of 75 cases of reverse mergers that taken place in the period of 1992-2002 in the USA is used to test the governance effects on survivability. We find that surviving firms tend to have greater after-merger cash liquidity, relatively bigger acquirers, longer tenure of boards which implies stable board and longer age of the firm, and have venture owners and smaller board than the failed firms. The main conclusion of this study is that the survivability of reverse mergers depends not only on the financial conditions of the merging firms, but also their governance characteristics.
