Going public through mergers with special purpose acquisition companies

Hyunseok Kim, Jayoung Ko, Chulhee Jun and Kyojik “Roy” Song

International Review of Finance, 2021, vol. 21, issue 3, 742-768

Abstract: In this study, we find that private operating firms with larger controlling shareholders' ownership merge with special purpose acquisition companies (SPACs) rather than take the conventional initial public offering (IPO) route to go public in Korea. This finding indicates that compared to U.S. SPACs, the controlling shareholders' motive to avoid their ownership dilution makes SPAC mergers popular in Korea. In addition, we document that the merged firms do not reveal difference in stock and operating performance over the long run compared to conventional IPO firms. However, SPAC mergers incur higher direct cost and do not generate marketing benefits for the listing firms.

Date: 2021
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