De-SPAC performance under better aligned sponsor contracts

Yao-Min Chiang, Woojin Kim, Bokyung Park and Tae Jun Yoon

Journal of Banking & Finance, 2025, vol. 176, issue C

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.

Keywords: Special purpose acquisition company (SPAC); Initial public offering (IPO); Going public; Incentives; Korea (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:176:y:2025:i:c:s0378426625000603

DOI: 10.1016/j.jbankfin.2025.107440

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