Managerial Ability and Intangible Assets: Evidence From Purchase Price Allocations in Mergers and Acquisitions

Abstract

We examine the relationship between managerial ability and recognized intangible assets, including goodwill and other assets acquired in mergers and acquisitions (M&As). We find that managerial ability is positively associated with the amount of intangible assets acquired in M&As. Furthermore, managerial ability affects the purchase price allocation of these assets and is more positively related to goodwill than to other intangible assets. Finally, cross-sectional analyses reveal that the relationship between managerial ability and intangible assets acquired in M&As is mainly driven by acquirers with domestic, public, or related targets, whose information is more easily accessible.

Keywords: Managerial Ability, Intangible Assets, Goodwill, Purchase Price Allocation, Mergers and Acquisitions

JEL Classification: G18, G34, M41