Perverse incentives of special purpose acquisition companies, the “poor man's private equity funds”
Journal of Accounting and Economics
Crown Copyright © 2016 Published by Elsevier B.V. All rights reserved.
Reason for embargo
pecial purpose acquisition companies (SPACs) are an alternative investment, structured as a one-shot private equity (PE) deal. Significant cross-sectional variation exists in SPACs' performance, which can be explained by the strong implicit incentives embedded in contracts. SPAC performance is worse for acquisitions announced near the predetermined two-year deadline, for acquisitions with deferred initial public offering underwriting fees, and for acquisitions with market value close to the required 80% threshold. Also, sponsors' involvement in the merged firm's governance improves long-term performance. This evidence has important implications given SPACs' high popularity in recent years and the new PE industry's trend toward deal-by-deal fund-raising.
This is the author accepted manuscript. The final version is available from the publisher via the DOI in this record.
Available online 19 October 2016
Vol. 63, pp. 99 - 120