Not Ready for Primetime: Financial Reporting Quality after SPAC Mergers

Forthcoming at Management Science

26 Pages Posted: 20 Apr 2022

See all articles by Jaewoo Kim

Jaewoo Kim

University of Oregon - Department of Accounting

Seyoung Park

University of Oregon - Department of Accounting

Kyle Peterson

University of Oregon - Charles H. Lundquist School of Business

Ryan J. Wilson

University of Oregon

Date Written: April 8, 2022

Abstract

We examine the financial reporting quality of Special Purpose Acquisition Corporations (SPACs) following a successful merger. We compare a sample of SPACs with completed mergers from 2006-2020 to initial public offering (IPO) firms in the same industry covering the same period. Compared to similar IPO firms, SPACs are more likely to restate their financial statements and have internal control weaknesses. We also find that SPACs are more likely to file untimely financial statements, amend previously issued filings, and have comment letters that go more rounds with the SEC. This lower reporting quality also results in less informative earnings to investors. Our evidence corroborates concerns from the media, accounting firms, and regulators that SPACs exhibit low financial reporting quality in comparison to IPOs.

Keywords: Special Purpose Acquisition Companies, SPAC; Financial reporting quality; IPO

JEL Classification: G17

Suggested Citation

Kim, Jaewoo and Park, Seyoung and Peterson, Kyle and Wilson, Ryan J., Not Ready for Primetime: Financial Reporting Quality after SPAC Mergers (April 8, 2022). Forthcoming at Management Science , Available at SSRN: https://ssrn.com/abstract=4079131 or http://dx.doi.org/10.2139/ssrn.4079131

Jaewoo Kim (Contact Author)

University of Oregon - Department of Accounting ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

Seyoung Park

University of Oregon - Department of Accounting ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

Kyle Peterson

University of Oregon - Charles H. Lundquist School of Business ( email )

1208 University of Oregon
Eugene, OR 97403-1208
United States

Ryan J. Wilson

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
403
Abstract Views
1,088
rank
108,084
PlumX Metrics