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Article
Publication date: 8 March 2013

Milan Lakicevic and Milos Vulanovic

This paper aims to study characteristics of specified purpose acquisition companies (SPACs) and examine the performance of their securities over time.

Abstract

Purpose

This paper aims to study characteristics of specified purpose acquisition companies (SPACs) and examine the performance of their securities over time.

Design/methodology/approach

Previous findings in literature on SPACs' performance around the announcement of merger date are scarce, not uniform, and mostly address the performance of SPACs' common shares. The authors believe that more insights on merger announcements can be obtained if the perf]ormance of all three types of securities that SPACs issue during the IPO, namely units, common stocks, and warrants are analyzed simultaneously. In order to examine the behavior of these securities we form three samples with daily returns for three distinguished SPAC securities. Results are obtained for abnormal returns based on the market model from Brown and Warner.

Findings

It is found that SPACs represent a fairly unique way to raise capital. The incentives of their founders, underwriters, and investors are interdependent and successful business combinations generally result in significant returns to founders. The analysis shows that SPACs have a complex corporate structure in which the incentives of the founders, underwriters, and investors are interdependent and where successful mergers result in significant returns to the founders. It also shows that different SPAC securities do not exhibit similar reactions in response to announcements regarding their corporate status. While holders of all three securities realize positive abnormal returns on the merger announcement day, the strongest reaction is observed among the investors holding warrants, while common stock holders react very mildly.

Originality/value

SPACs are recent phenomena in capital markets and very few papers in finance literature describe them. None of the existing papers evaluated performance of all three types of SPAC securities: units, common shares and warrants before this paper.

Details

Managerial Finance, vol. 39 no. 4
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 12 June 2017

Milos Vulanovic

The purpose of this paper is to study how institutional characteristics of specified purpose acquisition companies (SPACs) are related to their post-merger survival. SPACs…

Abstract

Purpose

The purpose of this paper is to study how institutional characteristics of specified purpose acquisition companies (SPACs) are related to their post-merger survival. SPACs are unique financial firms that conduct the initial public offering (IPO) with the sole purpose of using the proceeds to acquire another private company. The paper finds that institutional characteristics of SPACs are important in determining post-merger outcomes of new company, specifically when it comes to their survival/failure, i.e., increases in pre-merger commitment by SPAC stakeholders and initial positive market performance increase post-merger survival likelihood; on the contrary, mergers with higher transaction costs and focused on foreign companies exhibit increased likelihood of failure.

Design/methodology/approach

Using unique sample of companies conducting an IPO, namely, SPACs, with the sole purpose to execute an acquisition in the future date within limited time, this paper presents additional evidence on the survival and acquisition frequency of IPOs, and determinants of these choices.

Findings

Observing unique set of specified purpose companies, this paper documents that SPACs’ failure rate is at the level of 58.09 percent, higher than any previously reported failure rate in the post-IPO survival literature and comparable only to failure rates found by Hensler et al. (1997) at 55.10 percent for general companies. In addition, the paper documents similar findings to Bhabra and Pettway (2003) that prospectus and market characteristics of original companies have predictive power with respect to survival.

Originality/value

This study extends the literature on post-IPO survival in following ways. First, the paper documents survival rates for unique set of companies organized with the sole purpose to acquire another company. Second, the paper presents evidence on how institutional characteristics of SPAC determine their post-merged outcomes, specifically when it comes to their failures. Finally, paper contributes to the scant literature on SPACs providing new evidence on their post-merger outcomes and performance.

Details

Managerial Finance, vol. 43 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 April 2005

Bharat A. Jain and Charles L. Martin Charles L. Martin Jr.

This study examines the issue of whether audit quality contracted by issuers at the time of going public is associated with post‐IPO survival. Survival analysis…

Abstract

This study examines the issue of whether audit quality contracted by issuers at the time of going public is associated with post‐IPO survival. Survival analysis methodology is applied to estimate the probability of post‐IPO time to failure as a function of audit quality. Through estimation of the Cox‐Proportional Hazards models, we find that audit quality is significantly related to post‐IPO time to failure both in isolation and in the presence of other covariates that influence firm survival. Further, the association between audit quality and post‐IPO survival is stronger when investment bank prestige is low.

Details

Review of Accounting and Finance, vol. 4 no. 4
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 3 July 2017

Fu Jia, Guido Orzes, Marco Sartor and Guido Nassimbeni

The purpose of this paper is to develop a synthesised conceptual framework for global sourcing (GS) strategy and structure.

Abstract

Purpose

The purpose of this paper is to develop a synthesised conceptual framework for global sourcing (GS) strategy and structure.

Design/methodology/approach

The authors adopt a systematic literature review method and analyse through content analysis techniques 52 peer-reviewed journal articles focussed on GS strategy and structure. Based on these analyses, a conceptual model is developed.

Findings

A synthesised construct of GS strategy, consisting of three dimensions, i.e., supply internationalisation, internal integration and external integration, is proposed. The GS structure construct is further broken down into structural design and control and coordination, consisting of three dimensions for each. Propositions for GS strategy, GS structure and, in particular, the relationships between them are developed for future empirical validation.

Originality/value

This is the first study which synthesises various dimensions of GS strategy and GS structure and advances/extends the theory of the strategy-structure nexus to a GS context. The conceptual model provides a comprehensive framework for future empirical work and opens avenues of research on this topic.

Details

International Journal of Operations & Production Management, vol. 37 no. 7
Type: Research Article
ISSN: 0144-3577

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Book part
Publication date: 26 April 2011

Sean A.G. Gordon and James A. Conover

We investigate whether external investment banks or internal key IPO insiders such as company directors and officers, venture capitalists and institutions that hold an IPO

Abstract

We investigate whether external investment banks or internal key IPO insiders such as company directors and officers, venture capitalists and institutions that hold an IPO's stock serve as effective monitors of IPO investments over the post-IPO period. We measure median changes in each group's holdings for the sample, finding large changes in these values during a long-run holding period. We find that long-run buy-and-hold returns (BHARs) are positively related to the lead investment bank underwriter reputation and the gross spread demonstrating that the external monitoring by investment banking firms increases the post-IPO firm's value. Holding the underwriter reputation constant, we find that the BHARs are positively related to the gross spread, also indicative of the value of monitoring by external investment banks.

Details

Research in Finance
Type: Book
ISBN: 978-0-85724-541-0

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Article
Publication date: 6 July 2012

John S. Howe and Biljana Nikolic

The purpose of this paper is to assess whether the decision to issue warrants in an initial public offering (IPO) is subject to catering influences.

Abstract

Purpose

The purpose of this paper is to assess whether the decision to issue warrants in an initial public offering (IPO) is subject to catering influences.

Design/methodology/approach

The approach used was to measure the market “warrant premium” and assess whether it relates to the probability of firms including warrants in their IPOs.

Findings

The evidence is strongly supportive of a catering influence on the firm's decision to include warrants in its IPO.

Practical implications

Sentiment is a factor in the selection of what securities a firm sells at its IPO. The findings lend further credence to the pervasiveness of catering.

Originality/value

No prior study has examined the role that catering plays in the selection of types of securities to sell.

Details

Review of Behavioural Finance, vol. 4 no. 1
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 3 August 2015

Marco Sartor, Guido Orzes, Guido Nassimbeni, Fu Jia and Richard Lamming

The purpose of this paper is to address global sourcing organisational design through the following research questions: how do the roles performed by International…

Abstract

Purpose

The purpose of this paper is to address global sourcing organisational design through the following research questions: how do the roles performed by International Purchasing Offices (IPOs) change over time?; what are the resources/capabilities required by an IPO for an effective performance and how do they change over time?; and what are the contingent factors affecting such changes?

Design/methodology/approach

The authors employed an exploratory multiple case study approach and analysed 14 Western IPOs located in China for a period between 2007 and 2012. The data were primarily collected through 34 direct, semi-structured interviews of IPO heads and sourcing managers or senior buyers.

Findings

The authors identify and discuss the importance of ten roles played by IPOs and 12 required resources/capabilities. Furthermore, considering the changes that occurred to these IPOs over a five-year period (2007-2012), the authors observe three distinct evolutionary behaviours (i.e. “overall development”, “selective development”, and “stable configuration”) and highlight three contingent factors that jointly affect these behaviours (i.e. the architectural and technological complexity of the sourced items, annual volume sourced abroad, and experience in the foreign context).

Originality/value

This paper contributes to the resource-based view of the firm in a global sourcing context by highlighting the resources/capabilities required by IPOs and discussing their characteristics. Furthermore, it proposes a typology of IPO micro-organisational evolutionary behaviours. Finally, it applies contingency theory and identifies three factors that might affect the evolutionary behaviours.

Details

International Journal of Operations & Production Management, vol. 35 no. 8
Type: Research Article
ISSN: 0144-3577

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Book part
Publication date: 22 July 2021

Haoyu Gao, Ruixiang Jiang, Wei Liu, Junbo Wang and Chunchi Wu

Using initial public offering (IPO) involuntary delisting data, this chapter examines whether and how motivated institutional investors affect the survivability of IPO

Abstract

Using initial public offering (IPO) involuntary delisting data, this chapter examines whether and how motivated institutional investors affect the survivability of IPO firms. The empirical evidence shows that the likelihood of future delisting is much lower for IPOs with more motivated institutional investors. This impact is more pronounced for firms with higher information asymmetry. The motivated institutional investors also facilitate better post-IPO operating performance. The results are consistent with the prediction of the limited attention theory.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80043-870-5

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Case study
Publication date: 20 January 2017

Susan Chaplinsky and Felicia C. Marston

This case is used in Darden's course elective, Corporate Financing, and is accompanied by a teaching note for instructors and Excel spreadsheet for students. The Carlyle…

Abstract

This case is used in Darden's course elective, Corporate Financing, and is accompanied by a teaching note for instructors and Excel spreadsheet for students. The Carlyle Group IPO case explores the circumstances leading up to the firm's IPO in May 2012. Over the past 25 years, Carlyle had grown from a fledgling private equity firm to one of the world's largest and most diversified investment firms. Carlyle had prepared extensively for the roadshow; management anticipated some tough questions. Students are asked to evaluate the extent to which Carlyle is undervalued relative to its peers. The case provides information on how to evaluate the earnings received by the public shareholders and outlines several alternative approaches to value PPEs.

Details

Darden Business Publishing Cases, vol. no.
Type: Case Study
ISSN: 2474-7890
Published by: University of Virginia Darden School Foundation

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Article
Publication date: 16 April 2010

Ruzita Abdul Rahim and Othman Yong

The purpose of this paper is to investigate the initial return patterns of Malaysian initial public offerings (IPOs) and whether shari'a‐compliant status would alter such patterns.

Abstract

Purpose

The purpose of this paper is to investigate the initial return patterns of Malaysian initial public offerings (IPOs) and whether shari'a‐compliant status would alter such patterns.

Design/methodology/approach

The effect of shari'a‐compliant status on the patterns of initial return of IPOs is analyzed using a sample of 386 IPOs issued between January 1999 and December 2007.

Findings

The preliminary results indicate that over the study period, the initial returns of Malaysian IPOs drop substantially from 94.91 percent reported from the pre‐crisis period of 1990‐1998 to 31.99 percent, a level more comparable to that reported in advanced markets. Since the initial returns do not revert to pre‐crisis levels, the new low IPO underpricing trend is more likely to be associated with the removal of pricing restraints. The results of regression analyses on the full sample, however, suggest that there is no drastic change with respect to factors that drive initial returns in Malaysian IPOs. With regards to shari'a‐compliant status, IPOs of this subsample show similar profiles to those of non‐shari'a counterparts. However, other than demand, the two subsamples are driven by different factors. Initial returns of shari'a‐compliant IPOs are driven by the size and type of offers, whereas those of the non‐shari'a IPOs are driven by risks.

Research limitations/implications

Future studies should re‐examine the issue by taking into consideration the extensiveness of a firm's compliance to shari'a rules and other predictor variables.

Originality/value

This paper is one of the first to examine the effect of shari'a‐compliant status on the performance of IPOs.

Details

Journal of Islamic Accounting and Business Research, vol. 1 no. 1
Type: Research Article
ISSN: 1759-0817

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