Disclosures about intangible resources in M&A press releases and quality of the deal
|Speaker:||Hervé Stolowy, HEC Paris|
|Date:||Tuesday 25 April 2017|
|Time:||14:30 - 16:00|
|Location:||Kolade Teaching Room, Building One|
We investigate the relation between disclosures provided by acquirers about growth, synergies and intangible resources in mergers and acquisitions (M&A) announcement press releases and the characteristics of M&A deals. We investigate in particular whether and how forms of language such as the terms about intangible resources acquired (key value drivers) used in press releases relate to the quality of acquisitions. First, we find that soft disclosures about value drivers are consistent with assets recognized in acquirers’ financial statements. Second, we examine the association between the frequency of terms about value drivers and two deal characteristics. We find that deals that are relatively larger and have a higher transaction multiple are associated with more frequent use of intangible-related terms in M&A press releases. Third, we study the association between the terms about value drivers and five measures of deal quality. Using stock returns at announcement, subsequent goodwill impairment, Tobin’s Q, change in return on assets (ROA) and operating cash flows, we find that managers use terms related to growth, synergies and intangible resources for lower quality deals more frequently. Overall, while we find no evidence that managers convey accurate
information about the quality of the deal, we document evidence consistent with either overconfidence or impression management.
Keywords: Mergers and acquisitions, Press releases, Quality of the deal, Intangibles