SPACs: The Roles of Reputation and Disclosure When Information Is Limited

Special purposes acquisition corporations (also known as SPACs or blank check companies) have received a lot of attention recently – and for good reason. SPACs accounted for more than half of U.S. IPOs in 2020, raising over $70 billion in total and over $300 million each on average, with their numbers increasing over 300 percent since 2019 (Goldman Sachs, 2020). Further, there were more SPAC IPOs in the first quarter of 2021 than in all of 2020.

SPACs raise capital through an IPO with the same filing and disclosure obligations as any other firm, however, they have no operations and … Read more

Facilitating Tacit Collusion: A New Perspective on Common Ownership and Voluntary Disclosure

Common ownership (competing firms with overlapping ownership) has become increasingly prevalent over the last several decades. Recent studies of the phenomenon have produced two important findings.  First, common ownership is associated with less intense competition. Studies posit that managers act in accordance with the preference of common owners for anti-competitive actions that lead to higher group profits rather than cutthroat actions that maximize individual firm profits. Second, common ownership is associated with more voluntary disclosure, which recent work has  attributed to the lower costs of disclosure arising from the reduced competition and common owners’ demand more disclosure. We predict and … Read more