IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v176y2025ics0378426625000603.html
   My bibliography  Save this article

De-SPAC performance under better aligned sponsor contracts

Author

Listed:
  • Chiang, Yao-Min
  • Kim, Woojin
  • Park, Bokyung
  • Yoon, Tae Jun

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.

Suggested Citation

  • Chiang, Yao-Min & Kim, Woojin & Park, Bokyung & Yoon, Tae Jun, 2025. "De-SPAC performance under better aligned sponsor contracts," Journal of Banking & Finance, Elsevier, vol. 176(C).
    • Handle: RePEc:eee:jbfina:v:176:y:2025:i:c:s0378426625000603
    DOI: 10.1016/j.jbankfin.2025.107440
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378426625000603
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbankfin.2025.107440?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. Alexander Ljungqvist & Vikram Nanda & Rajdeep Singh, 2006. "Hot Markets, Investor Sentiment, and IPO Pricing," The Journal of Business, University of Chicago Press, vol. 79(4), pages 1667-1702, July.
    2. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    3. Stephen C. Smith & Hesuk Chun, 2003. "New Issues in Emerging Markets: Determinants, Effects, and Stock Market Performance of IPOs in Korea," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 2(3), pages 253-285, September.
    4. Kim, Woojin & Weisbach, Michael S., 2008. "Motivations for public equity offers: An international perspective," Journal of Financial Economics, Elsevier, vol. 87(2), pages 281-307, February.
    5. Shai Bernstein, 2015. "Does Going Public Affect Innovation?," Journal of Finance, American Finance Association, vol. 70(4), pages 1365-1403, August.
    6. John Asker & Joan Farre-Mensa & Alexander Ljungqvist, 2015. "Corporate Investment and Stock Market Listing: A Puzzle?," The Review of Financial Studies, Society for Financial Studies, vol. 28(2), pages 342-390.
    7. repec:bla:jfinan:v:53:y:1998:i:1:p:27-64 is not listed on IDEAS
    8. repec:eme:mfppss:mf-09-2016-0263 is not listed on IDEAS
    9. 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.
    10. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," The Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
    11. Cumming, Douglas & Haß, Lars Helge & Schweizer, Denis, 2014. "The fast track IPO – Success factors for taking firms public with SPACs," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 198-213.
    12. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    Full references (including those not matched with items on IDEAS)

    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. Fan, Pengda, 2019. "Debt retirement at IPO and firm growth," Journal of Economics and Business, Elsevier, vol. 101(C), pages 1-16.
    2. repec:osf:socarx:3zumb_v1 is not listed on IDEAS
    3. Bostan, Ibrahim & Mian, G. Mujtaba, 2024. "Inventor CEOs and financing of innovation: Evidence from IPOs," Journal of Banking & Finance, Elsevier, vol. 164(C).
    4. Feng, Xunan & Johansson, Anders C. & Wei, Dengxi, 2023. "Judging a book by its cover: Analysts and attention-driven price patterns in China's IPO market," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    5. Del Giudice, Alfonso & Signori, Andrea, 2024. "Sponsor reputation and agency conflicts in SPACs," International Review of Financial Analysis, Elsevier, vol. 92(C).
    6. Divakaruni, Anantha & Jones, Howard, 2021. "Disclosure, Firm Growth, and the JOBS Act," SocArXiv 3zumb, Center for Open Science.
    7. Guillermo Yañez & Carlos Maquieira, 2009. "Rendimiento de Ofertas Públicas Iniciales de Acciones en Chile: Evidencia Empírica entre 1994 y 2007," Serie de Documentos de Trabajo 02, Superintendencia de Valores y Seguros.
    8. Michael Ewens & Joan Farre-Mensa, 2022. "Private or Public Equity? The Evolving Entrepreneurial Finance Landscape," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 271-293, November.
    9. Helwege, Jean & Packer, Frank, 2009. "Private matters," Journal of Financial Intermediation, Elsevier, vol. 18(3), pages 362-383, July.
    10. Chan, Yue-Cheong, 2014. "How does retail sentiment affect IPO returns? Evidence from the internet bubble period," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 235-248.
    11. Vojislav Maksimovic & Gordon M. Phillips & Liu Yang, 2017. "Do Public Firms Respond to Investment Opportunities More than Private Firms? The Impact of Initial Firm Quality," NBER Working Papers 24104, National Bureau of Economic Research, Inc.
    12. 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.
    13. Zhang, Ping & Wang, Yiru & Gao, Jieying, 2023. "Going public and innovation: Evidence from the ChiNext stock market," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 586-613.
    14. Magnus Blomkvist & Giacomo Nocera & Milos Vulanovic, 2022. "SPAC CEOs and capital raising outcomes," Economics Bulletin, AccessEcon, vol. 42(2), pages 729-739.
    15. Hyoung-Goo Kang & Kyounghun Bae & Jung Ah Shin & Seongmin Jeon, 2021. "Will data on internet queries predict the performance in the marketplace: an empirical study on online searches and IPO stock returns," Electronic Commerce Research, Springer, vol. 21(1), pages 101-124, March.
    16. Butler, Alexander W. & Keefe, Michael O'Connor & Kieschnick, Robert, 2014. "Robust determinants of IPO underpricing and their implications for IPO research," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 367-383.
    17. Kwon, Sungjoung & Lowry, Michelle & Qian, Yiming, 2020. "Mutual fund investments in private firms," Journal of Financial Economics, Elsevier, vol. 136(2), pages 407-443.
    18. Meles, Antonio & Salerno, Dario & Sampagnaro, Gabriele & Fu, Mengchuan, 2021. "The going-public decision and firm risk," Journal of Financial Stability, Elsevier, vol. 54(C).
    19. Hyunseok Kim & Jayoung Ko & Chulhee Jun & Kyojik “Roy” Song, 2021. "Going public through mergers with special purpose acquisition companies," International Review of Finance, International Review of Finance Ltd., vol. 21(3), pages 742-768, September.
    20. Fan, Ruixin & Xiong, Xiong & Gao, Ya, 2021. "Can the probability of extreme returns be the basis for profitable portfolios? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 76(C).
    21. Sani, Jalal & Shroff, Nemit & White, Hal, 2023. "Spillover effects of mandatory portfolio disclosures on corporate investment," Journal of Accounting and Economics, Elsevier, vol. 76(2).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    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:jbfina:v:176:y:2025:i:c:s0378426625000603. 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/jbf .

    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.