De-SPAC performance under better aligned sponsor contracts
Journal
Journal of Banking and Finance
Journal Volume
176
Start Page
107440
ISSN
0378-4266
Date Issued
2025-07
Author(s)
Abstract
We examine the implications of special purpose acquisition companies (SPACs) in South Korea, where sponsor contracts are better aligned than in the U.S. Unlike in U.S. where SPAC targets (de-SPACs)' post-merger prices generally fall below the SPAC IPO offer price due to distorted incentives of the SPAC sponsors, Korean de-SPACs' prices tend to remain above the initial SPAC price. The better alignment of incentives results in positive or at least non-negative average buy-and-hold returns and excess portfolio returns in Korean de-SPACs, which contrast with the negative long-run performance observed in the U.S. Korean de-SPACs also increase investment more than matched private firms following the listing. Overall, our results suggest that better aligned sponsor contracts may incentivize sponsors to target high-quality firms, enhancing post-merger performance.
Subjects
Going public
Incentives
Initial public offering (IPO)
Korea
Special purpose acquisition company (SPAC)
Publisher
Elsevier BV
Type
journal article