The value effects of M&A transactions for U.S. SPACs : An examination of the short-term value effects in 2014–2021

The purpose of this thesis is to study the short-term value effects of merger and acquisition (M&A) announcements and completions on U.S. special purpose acquisition companies. The goal is to find if any abnormal returns are realized and whether the announcements create or destroy shareholder value. Shareholder value is defined as the price fluctuations of the pub-licly traded stock of the SPAC. The hypotheses are constructed based on earlier empirical research and the study sample in this thesis consists of M&A announcements and comple-tions between January 2014 and June 2021. The stock price data is obtained from Refinitiv database, and the empirical research is con-ducted by using the market adjusted event study methodology. Russell 2000 index is chosen for the benchmark index, following earlier research. Event windows for the examination are [-10,10], [-5,5], and [-1,1]. To statistically test the results, a t-test is also run. The first hypoth-esis states that M&A plan announcements create shareholder value and the second hypoth-esis states that M&A completion announcements destroy shareholder value. The results of this thesis find that M&A plan announcements do create shareholder value, by cumulative abnormal returns of 8,71%, 9,48%, and 8,14% from the longest event window to the shortest, respectively. These results are statistically significant at 1% significance level and thus, the first hypothesis is accepted. The results also show that M&A completion announcements destroy shareholder value by cumulative abnormal returns of -5,39%, -5,92%, and -0,57% from the longest event window to the shortest. The middle value is statistically significant at 10% significance level, and the first is very close. Therefore, taking into consideration both earlier literature and the value distribution between companies and time, the second hy-pothesis is also accepted. Based on the findings of this thesis, M&A transactions cause abnormal returns for SPAC shareholders even today, and to maximize and secure one’s returns, it should be taken into consideration when making investment decisions.