Master’s Thesis in Finance Short-term SPAC Performance- Empirical Evidence on Pre-merger SPAC Performance

Abstract

The paper aims to shed light on the topic surrounding short-term SPAC performance. The primary focus is on whether two of the most prominent events in a SPACs lifecycle, merger announcement and merger completion, show signs of abnormality regarding short-term returns. The event study documents a 5.36% abnormal return on the merger announcement event day and a 7% cumulative abnormal return across the 7-day event window for US-listed SPACs between 2015-2021. The merger completion event documents a 0.44% abnormal return on the event day but fails to show statistical significance. In addition to the main question, we analyze whether the SPACs sponsors’ experience in the field and the prestigiousness of the SPACs underwriter have any explanatory effect on the short-term abnormal returns surrounding the events. The OLS regressions do not show any proof of statistical significance for the explanatory variables sponsor experience and underwriter prestige, and hence, no conclusion could be made about that impact.