Signing blank checks: The roles of disclosure and reputation in the face of limited information

55 Pages Posted: 1 Oct 2021 Last revised: 29 Aug 2022

See all articles by Andrea Pawliczek

Andrea Pawliczek

University of Colorado at Boulder

A. Nicole Skinner

University of Colorado at Boulder

Sarah L. C. Zechman

University of Colorado at Boulder - Leeds School of Business

Date Written: August 24, 2022

Abstract

We examine the roles of disclosure and manager reputation in raising capital when there is no commercial substance underlying the investment. Special Purpose Acquisition Companies (SPACs or “blank check” companies) do not have operations or substantive assets at IPO but promise to use the funds raised to acquire a private firm, generally within two years. It is unclear how SPACs attract investors given the lack of information and historically poor performance. While disclosure is important in traditional IPOs, the incentives and information available differ for SPACs. Nonetheless, we find disclosures are useful to investors, though differently than for traditional IPOs. We also consider manager reputation, as SPACs allow for identification of the manager separately from the entity. Specifically, we find SPAC and CEO experience, and celebrity status are associated with capital raised. Even when an investment lacks commercial substance, disclosure, along with reputation, play important roles in investing decisions.

Keywords: Disclosure, Managerial reputation, SPAC, Special purpose acquisition companies, IPO

JEL Classification: G24, G34, M41, M50

Suggested Citation

Pawliczek, Andrea and Skinner, Ashley Nicole and Zechman, Sarah L. C., Signing blank checks: The roles of disclosure and reputation in the face of limited information (August 24, 2022). Available at SSRN: https://ssrn.com/abstract=3933259 or http://dx.doi.org/10.2139/ssrn.3933259

Andrea Pawliczek

University of Colorado at Boulder ( email )

1070 Edinboro Drive
Boulder, CO CO 80309
United States

Ashley Nicole Skinner (Contact Author)

University of Colorado at Boulder ( email )

256 UCB
Boulder, CO CO 80300-0256
United States

Sarah L. C. Zechman

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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