Effects of targets’ intangibles and acquirers’ capital intensity on announcement returns.

• Main Authors: Chia, Norman., Lin, Xuguang., Quek, Ngee Poo.
• Other Authors: Tham Tze Minn
• Format: Final Year Project
• Language: English
• Published: 2011
• Subjects: DRNTU::Business::Accounting::Intangibles; DRNTU::Business::Finance::Mergers and acquisitions
• Online Access: http://hdl.handle.net/10356/43716
• Institution: Nanyang Technological University

This paper studies how intangibles of target firms and capital intensity of acquirer firms affect merger announcement returns as measured by cumulative abnormal returns (CAR). We first focus on the established effect of different variables that past studies have shown to play a part in merger announcement returns. Holding these variables constant, we introduce various measures of intangibles and capital intensity to study their effects on merger announcement returns. Our results show that intangibles (as measured by target’s Intangibles/R&D/Amortisation as a percentage of total assets) do show a significant positive loading on merger announcement returns. As for capital intensity, two of our three variables/proxies used – Capex and PPE growth exhibit significant positive loadings on CAR. Hence, capital intensity also displays a positive loading on merger announcement returns.