Do SPAC Combinations Affect Their Peers’ Financial Reporting Choices?

Daniel Cohen, Kelly Ha, Sunay Mutlu and John Schomburger

Journal of Business Finance & Accounting, 2026, vol. 53, issue 4, 1508-1533

Abstract: We explore whether firms going public through mergers with special purpose acquisition companies (SPAC combinations) influence the financial reporting practices of their peer firms. Although SPAC combinations provide an efficient alternative to traditional initial public offerings (IPOs) for private firms, recent studies show that SPAC combinations suffer from poor financial reporting quality. We extend this line of research by analyzing the effect of SPAC combinations on their peers. Focusing on peer firms’ earnings management activities, we show that peers of SPAC combinations increase their accrual‐based earnings management (AEM) in the subsequent years, whereas they decrease real activity‐based earnings management (REM). This result is in line with a contagion effect of SPAC combinations depressing the accrual quality of their peer group. On the other hand, peer firms decrease their REM, suggesting a substitutive relation between these two earnings management methods. Our study is the first to examine peer effects of SPAC combinations, and it provides a new perspective on the debate on the overall consequences of SPAC combinations.

Date: 2026
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