Date of Award
Spring 2022
Degree Name
Bachelor of Science (BS)
Advisor(s)
Sris Chatterjee
Abstract
This research report intends to provide insight into the unexpected rise of Special Purpose Acquisition Company (SPAC) issuance between 2010 and 2021. As SPAC investments feature greater degrees of uncertainty, risk, and “moral hazard” than Initial Public Offerings (IPOs) but essentially accomplish the same result, it is hypothesized that since prior research suggests a positive correlation between increased investor confidence and IPO issuance, a similar, yet stronger correlation also exists between increased confidence and SPAC volume. Although little prior research has been conducted investigating the role of confidence in SPAC issuance, as SPAC investing requires great trust and confidence in the financial system, it is suspected that the eleven selected confidence metrics serve as adequate determinants for SPAC popularity. As SPACs have only recently begun to attract widespread investor interest, limited prior literature is directly applicable to this report. Therefore, this study synthesizes past academic literature regarding SPAC design, IPO timing determinants, techniques of quantifying confidence, and alternate explanations for SPAC popularity to inform the research design and methodology. Significance testing with single variable and multiple regressions was implemented to identify correlations between various confidence metrics and SPAC volume. The results of this study suggest that confidence metrics are adequate determinants of SPAC issuance, but not in the way initially anticipated. Specifically, the results of the multiple regression support the hypothesis by suggesting that 50.12% of the variation in SPAC issuance between 2010 and 2021 can be explained by fluctuations in the eleven selected confidence metrics. However, the results of the single variable regressions oppose the hypothesis by suggesting a negative relationship between many confidence metrics and SPAC issuance. Asseveral assumptions were made to simplify the sampling process and methodology, future research that further investigates the role of confidence in SPAC issuance by relaxing these assumptions is needed to garner a more complete answer to the titular question.
Recommended Citation
Zaferiou, Nicolas, "Making considerations for confidence: are confidence metrics adequate determinants of spac popularity?" (2022). Gabelli School of Business Honors Thesis Collection. 24.
https://research.library.fordham.edu/gabelli_thesis/24
