Working Paper: CEPR ID: DP13560
Authors: Zoran Filipovic; Alexander F. Wagner
Abstract: Mergers and acquisitions are often motivated by the intention of creating value from intangible assets. We develop a novel word list of intangibles and apply it to takeover announcements. The value of these deals to the acquirer, as shown by abnormal announcement returns, is questionable: One standard deviation more in intangibles talk lowers returns by 0.50 percentage points. Agency problems explain little of these results. Rather, the cross-section of announcement returns, payment mode choices, and insider trades suggest that intangibles talk reflects managerial overoptimism. In sum, takeover announcements reveal important information regarding the quality of deals.
Keywords: Corporate announcements; Intangible assets; Intangibles talk; Mergers and acquisitions; Takeovers; Textual analysis
JEL Codes: G14; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased intangibles talk in takeover announcements (G34) | lower abnormal announcement returns for acquirers (G34) |
| increased intangibles talk in takeover announcements (G34) | decrease of 0.95 percentage points in returns after 30 days (G12) |
| higher intangibles talk (M30) | decline in return on assets in the subsequent year (G32) |