Organization capital and mergers and acquisitions
Date of Issue2018
College of Business (Nanyang Business School)
Using a sample of completed U.S. acquisition deals over the period 1984–2014, we find that acquirer organization capital as measured by capitalized selling, general, and administrative (SG&A) expenses is associated with superior deal performance. We show that high organization-capital acquirers achieve significantly higher abnormal announcement period returns, and better post-merger operating and stock performance, than low organization-capital acquirers. Additional tests suggest a causal relation between acquirer organization capital and deal performance. We further show that post-merger, high organization-capital acquirers cut more on the cost of goods sold, invest more in SG&A expenses, and achieve greater asset turnover and innovative efficiency.
Journal of Financial and Quantitative Analysis
© 2018 Michael G. Foster School of Business, University of Washington. All rights reserved. This paper was published in Journal of Financial and Quantitative Analysis and is made available with permission of Michael G. Foster School of Business, University of Washington.