Merger announcement returns of European SPACs

Abstract

Special purpose acquisition companies (SPACs) are firms that do not have any other business operations than looking for a private company to merge with and taking the target public. In this study, I examine the abnormal returns of SPAC stocks listed in European stock exchanges around the merger announcement. I perform a short-term event study and find a +5% abnormal return in a 5-day event window around the announcement. I also find that SPACs that needed more time to announce a target show inferior stock performance around the announcement compared to those who were able to find a target faster, which provides evidence on possible agency conflicts between SPAC management and shareholders. My findings are mostly consistent with existing literature.