The Intangibles Song in Takeover Announcements: Good Tempo, Hollow Tune

72 Pages Posted: 8 Feb 2019 Last revised: 9 Dec 2019

See all articles by Zoran Filipovic

Zoran Filipovic

Swiss Finance Institute; USI Lugano

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Date Written: February 2, 2019

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. Deals presented with more “intangibles talk” complete more quickly. However, the value of these deals to the acquirer is questionable: One standard deviation more in intangibles talk results in 0.45 percentage points lower abnormal announcement returns of bidders. Agency problems explain little of these results. Instead, payment mode choices and insider trades suggest that intangibles talk reflects managerial overoptimism. Overall, takeover announcements can provide important information regarding the quality of deals.

Keywords: Corporate announcements, intangible assets, intangibles talk, mergers and acquisitions, takeovers, textual analysis

JEL Classification: G14, G34, G41

Suggested Citation

Filipovic, Zoran and Wagner, Alexander F., The Intangibles Song in Takeover Announcements: Good Tempo, Hollow Tune (February 2, 2019). Swiss Finance Institute Research Paper No. 19-03; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 599/2019. Available at SSRN: https://ssrn.com/abstract=3330623 or http://dx.doi.org/10.2139/ssrn.3330623

Zoran Filipovic (Contact Author)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

USI Lugano ( email )

Lugano
Switzerland

Alexander F. Wagner

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

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