Organization Capital and Mergers and Acquisitions

92 Pages Posted: 20 Oct 2014 Last revised: 14 Feb 2017

See all articles by Kai Li

Kai Li

University of British Columbia (UBC) - Sauder School of Business; China Academy of Financial Research (CAFR)

Buhui Qiu

University of Sydney Business School; Financial Research Network (FIRN)

Rui Shen

Chinese University of Hong Kong, Shenzhen; Nanyang Technological University (NTU) - Division of Accounting

Date Written: February 14, 2017

Abstract

Using a sample of completed U.S. merger and acquisition (M&A) transactions over the period 1984-2014, we find that acquirer organization capital as measured by capitalized selling, general, and administrative (SG&A) expenses is associated with superior deal performance. We show that high organization-capital acquirers achieve significantly higher abnormal announcement period returns, and better post-merger operating and stock performance, than low organization-capital acquirers. Additional tests suggest a causal relation between acquirer organization capital and deal performance. We further show that post-merger, high organization-capital acquirers cut more on the cost of goods sold, invest more in SG&A expenses, and achieve greater asset turnover and innovative efficiency.

Keywords: corporate acquisitions, organization capital, SG&A, cost-cutting, asset turnover, innovative efficiency, withdrawn bids

JEL Classification: G34

Suggested Citation

Li, Kai and Qiu, Buhui and Shen, Rui, Organization Capital and Mergers and Acquisitions (February 14, 2017). Available at SSRN: https://ssrn.com/abstract=2511675 or http://dx.doi.org/10.2139/ssrn.2511675

Kai Li (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~kaili

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Buhui Qiu

University of Sydney Business School ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9036 6435 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://sydney.edu.au/business/staff/buhuiq

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Rui Shen

Chinese University of Hong Kong, Shenzhen ( email )

Nanyang Technological University (NTU) - Division of Accounting ( email )

Nanyang Business School
Singapore, 639798
Singapore

Register to save articles to
your library

Register

Paper statistics

Downloads
966
Abstract Views
5,372
rank
23,512
PlumX Metrics