DP13560 The Intangibles Song in Takeover Announcements: Good Tempo, Hollow Tune

Author(s):	Zoran Filipovic, Alexander F Wagner
Publication Date:	March 2019
Keyword(s):	Corporate announcements, intangible assets, intangibles talk, mergers and acquisitions, Takeovers, textual analysis
JEL(s):	G14, G34
Programme Areas:	Financial Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=13560

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.