Harnessing the overconfidence of the crowd: A theory of SPACs

• 成果类型: Article
• 署名作者: Banerjee, Snehal; Szydlowski, Martin
• 署名单位: University of California System; University of California San Diego; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103787
• 发表日期: 2024
• 关键词: SPACs; overconfidence; Redeemable shares

摘要

In a SPAC transaction, a sponsor raises financing from investors using redeemable shares and rights. When investors are sophisticated, these features dilute the sponsor's stake and can lead to underinvestment in profitable targets. However, when investors are overconfident about their ability to respond to interim news, the optionality in such features is overpriced, and SPACs can lead to over-investment in unprofitable targets. Consistent with empirical evidence, the model predicts different returns for short-term and long-term investors and overall underperformance. While some policy interventions (e.g., eliminating redemption rights, limiting investor access, and restricting warrants) improve returns for unsophisticated investors, others (e.g., increased disclosure) can be counterproductive.