Going public through mergers with special purpose acquisition companies. (19th January 2020)

• Record Type: Journal Article
• Authors: Kim, Hyunseok; Ko, Jayoung; Jun, Chulhee; Song, Kyojik "Roy"
• Is Part Of: International review of finance. Volume 21:Number 3(2021)
• Page Start: 742
• Page End: 768
• Publication Date: 2020-01-19
• Subjects: controlling shareholders -- going public -- merger -- special purpose acquisition company; Finance -- Periodicals; Financial institutions -- Periodicals; 332.673
• DOI: 10.1111/irfi.12297
• Languages: English
• ISSNs: 1369-412X

Abstract

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.