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

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