SPACs' Directors Network: Conflicts of Interest, Compensation, and Competition

55 Pages Posted: 7 Jul 2022

See all articles by Michael Gofman

Michael Gofman

Hebrew University of Jerusalem - Jerusalem School of Business Administration

Yuchi Yao

Simon Business School, University of Rochester

Date Written: June 28, 2022

Abstract

We construct a director network for 972 SPACs that raised $271 billion from investors. First, we show that SPAC's investors receive lower returns and redeem more shares when directors sit on the board of another SPAC that IPOed later but found a target earlier. Second, we show that conflicted directors inefficiently allocate some targets to younger SPACs. Third, we study theoretically and empirically how new SPACs use compensation to compete for existing SPACs’ directors. Overall, decisions of SPACs' investors, directors, and sponsors raise serious corporate governance concerns and suggest that there is a need for stronger legal protection of investors.

Keywords: SPACs, corporate governance, directors, unicorn hunters, conflict of interest, interlocked boards, IPOs, M&A

JEL Classification: G23, G34, G38, L14

Suggested Citation

Gofman, Michael and Yao, Yuchi, SPACs' Directors Network: Conflicts of Interest, Compensation, and Competition (June 28, 2022). Available at SSRN: https://ssrn.com/abstract=4148668 or http://dx.doi.org/10.2139/ssrn.4148668

Michael Gofman (Contact Author)

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem, 91905
Israel

HOME PAGE: http://gofman.info

Yuchi Yao

Simon Business School, University of Rochester ( email )

Rochester, NY 14627
United States

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