Finance Webinar（2020-23)

Topic: Acquiring Intangibles

Speaker: Kai Li, University of British Columbia

Time: Monday, 7 December,10:00-11:30 AM Beijing Time

Location: Microsoft Teams Online Conference Room

Abstract:

Using a novel data set of merger and acquisition (M&A) deals completed over the period 2003-2017 with detailed information on types of assets acquired: identifiable intangible assets, goodwill, and tangible assets, we first show that the share of intangible assets purchased steadily increases over time. We then show that firms with high organization capital are associated with greater shares of intangibles and goodwill, whereas firms with strong corporate governance are associated with a less share of goodwill. Furthermore, we show that the shares of goodwill and tangible assets are positively and significantly associated with acquirer announcement period returns. Postmerger, we show that the share of goodwill is positively and significantly associated with the likelihood of impairment, whereas the share of tangibles is positively and significantly associated with a number of operating performance measures. To reconcile the above mixed findings on acquiring intangibles, we examine acquirer performance separated by target firms’ listing status. We find that the shares of goodwill and tangibles are positively and significantly associated with acquirer announcement period returns only when acquiring private targets, whereas the share of goodwill is negatively and significantly associated with acquirer announcement period returns when acquiring public targets. Postmerger impairment analysis suggests that goodwill paid for public target deals is mostly unrealized. Moreover, acquiring intangibles is positively and significantly associated with postmerger operating performance only when acquiring private targets, whereas goodwill is negatively and significantly associated with postmerger acquirer Tobin’s Q, irrespective of target firms’ listing status. We conclude that acquiring intangibles in public target firms has some unintended consequences.

Introduction:

Dr. Li is Senior Associate Dean, Equity and Diversity, Professor of Finance, and holds the W. Maurice Young Endowed Chair in Finance at the UBC Sauder School of Business, University of British Columbia.

Dr. Li’s research focuses on the economic consequences of corporate governance mechanisms. Her current research projects explore: (1) human capital and technological synergies in mergers and acquisitions, (2) machine learning in finance, and (3) rent extraction in syndicated loans market. Her research has appeared in Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, Management Science, Journal of International Business Studies, and many other leading journals in Finance and Economics. She is the recipient of the UBC Killam Research Award, the Sauder School of Business Research Excellence Award, the Barclays Global Investors Canada Research Award, and the Best Paper Award at many international conferences. She is/has been on the Editorial Board of Review of Financial Studies, Review of Finance, Journal of Financial and Quantitative Analysis, Management Science, Journal of International Business Studies, Journal of Corporate Finance, Journal of Financial Stability, and Journal of Banking and Finance. Her research has been featured in Wall Street Journal, New York Times, Washington Post, Financial Times, The Time Magazine, Reuters, CNBC, Bloomberg, Dow Jones Newswire, New Yorker, BBC, BNN, CBC National, National Post, Globe and Mail, U.S. News & World Report, Harvard Business Review, and Yahoo! Finance.

Your participation is warmly welcomed!