IDEAS home Printed from https://ideas.repec.org/a/eee/corfin/v85y2024ics0929119924000051.html

Information production in start-up firms: SPACs vs. Traditional IPOs

Author

Listed:
  • Hori, Keiichi
  • Osano, Hiroshi

Abstract

We explore equilibrium allocation and efficiency when private firms are listed by merging with a Special Purpose Acquisition Company (SPAC), compared with when they are listed through a traditional initial public offering (IPO). We show that a traditional IPO is more informationally efficient than a SPAC, except if the traditional IPO process is significantly long and costly. We also suggest that if the average quality of firms willing to go public decreases, SPAC acquisitions are more likely to occur than traditional IPOs. Our results hold, regardless of whether the measures of underwriters and sponsors are exogenously or endogenously determined.

Suggested Citation

  • Hori, Keiichi & Osano, Hiroshi, 2024. "Information production in start-up firms: SPACs vs. Traditional IPOs," Journal of Corporate Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:corfin:v:85:y:2024:i:c:s0929119924000051
    DOI: 10.1016/j.jcorpfin.2024.102543
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0929119924000051
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcorpfin.2024.102543?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Naveen Khanna & Thomas H. Noe & Ramana Sonti, 2008. "Good IPOs Draw in Bad: Inelastic Banking Capacity and Hot Markets," The Review of Financial Studies, Society for Financial Studies, vol. 21(5), pages 1873-1906, September.
    2. Bruno Biais & Peter Bossaerts & Jean-Charles Rochet, 2002. "An Optimal IPO Mechanism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 117-146.
    3. Banerjee, Snehal & Szydlowski, Martin, 2024. "Harnessing the overconfidence of the crowd: A theory of SPACs," Journal of Financial Economics, Elsevier, vol. 153(C).
    4. Minmo Gahng & Jay R Ritter & Donghang Zhang, 2023. "SPACs," The Review of Financial Studies, Society for Financial Studies, vol. 36(9), pages 3463-3501.
    5. Kolb, Johannes & Tykvová, Tereza, 2016. "Going public via special purpose acquisition companies: Frogs do not turn into princes," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 80-96.
    6. Ritter, Jay R., 1987. "The costs of going public," Journal of Financial Economics, Elsevier, vol. 19(2), pages 269-281, December.
    7. Naveen Khanna & Thomas H. Noe & Ramana Sonti, 2008. "Good IPOs draw in bad: Inelastic banking capacity and hot markets," Economics Series Working Papers 2008fe10, University of Oxford, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matthias Eschweiler & Marvin Zumkley, 2026. "May the better team perform: team effects in the performance of DeSPACs," Journal of Asset Management, Palgrave Macmillan, vol. 27(1), pages 1-18, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Evgeny Lyandres & Fangjian Fu & Erica X. N. Li, 2018. "Do Underwriters Compete in IPO Pricing?," Management Science, INFORMS, vol. 64(2), pages 925-954, February.
    2. Chemmanur, Thomas J. & He, Jie, 2011. "IPO waves, product market competition, and the going public decision: Theory and evidence," Journal of Financial Economics, Elsevier, vol. 101(2), pages 382-412, August.
    3. Charles W. Calomiris & Yehuda Izhakian & Jaime F. Zender, 2019. "Underwriter Reputation, Issuer-Underwriter Matching, and SEO Performance," NBER Working Papers 26344, National Bureau of Economic Research, Inc.
    4. Hu, Yunzhi, 2022. "A dynamic theory of bank lending, firm entry, and investment fluctuations," Journal of Economic Theory, Elsevier, vol. 204(C).
    5. Ho, Nam, 2023. "Local competition and auditors' provision of non-audit services," Advances in accounting, Elsevier, vol. 63(C).
    6. Nain, Amrita & Ying, Jie & Arthur, Joseph, 2025. "The rise of venture capital and IPO quality," Journal of Empirical Finance, Elsevier, vol. 82(C).
    7. Akron, Sagi & Samdani, Taufique, 2017. "Investor protection and institutional investors’ incentive for information production," Journal of Financial Stability, Elsevier, vol. 30(C), pages 1-15.
    8. Fodor, Andy & Gokkaya, Sinan, 2014. "Option implied volatilities and the cost of issuing equity," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 88-101.
    9. Dimic, Nebojsa & Tinoco, Mario Hernandez & Piljak, Vanja & Vulanovic, Milos, 2025. "Energy SPACs performance and governance," Energy Economics, Elsevier, vol. 145(C).
    10. Tasawar Nawaz, 2024. "The iSPAC," Review of Quantitative Finance and Accounting, Springer, vol. 63(1), pages 311-324, July.
    11. Busaba, Walid Y. & Liu, Zheng & Restrepo, Felipe, 2025. "Reputation acquisition and abnormal performance in IPO underwriting," Journal of Corporate Finance, Elsevier, vol. 95(C).
    12. Boeh, Kevin & Dunbar, Craig, 2014. "IPO waves and the issuance process," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 455-473.
    13. Hertzel, Michael G. & Huson, Mark R. & Parrino, Robert, 2012. "Public market staging: The timing of capital infusions in newly public firms," Journal of Financial Economics, Elsevier, vol. 106(1), pages 72-90.
    14. Groh, Alexander Peter & Proelss, Juliane & Sannajust, Aurélie & Schweizer, Denis, 2025. "Misconduct in the SPAC market: Evidence from venture capital exits," Journal of Corporate Finance, Elsevier, vol. 93(C).
    15. Liu, Laura Xiaolei & Lu, Ruichang & Sherman, Ann E. & Zhang, Yong, 2023. "IPO underpricing and limited attention: Theory and evidence," Journal of Banking & Finance, Elsevier, vol. 154(C).
    16. Blomkvist, Magnus & Korkeamäki, Timo & Takalo, Tuomas, 2022. "Learning and staged equity financing," Journal of Corporate Finance, Elsevier, vol. 74(C).
    17. Stoughton, Neal M. & Zechner, Josef, 1998. "IPO-mechanisms, monitoring and ownership structure," Journal of Financial Economics, Elsevier, vol. 49(1), pages 45-77, July.
    18. Gunay, Erdal & Ursel, Nancy, 2015. "Underwriter competition in accelerated seasoned equity offerings: Evidence from Canada," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 94-110.
    19. Kang, Hyung Cheol & Lee, Sangwon, 2024. "SPACs and the COVID-19 pandemic: Evidence from Korea," Research in International Business and Finance, Elsevier, vol. 72(PB).
    20. Premti, Arjan & Madura, Jeff, 2013. "Motives and consequences of IPOs in cold periods," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 486-496.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:corfin:v:85:y:2024:i:c:s0929119924000051. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jcorpfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.