Organization Capital and Mergers and Acquisitions
92 Pages Posted: 20 Oct 2014 Last revised: 14 Feb 2017
Date Written: February 14, 2017
Using a sample of completed U.S. merger and acquisition (M&A) transactions 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.
Keywords: corporate acquisitions, organization capital, SG&A, cost-cutting, asset turnover, innovative efficiency, withdrawn bids
JEL Classification: G34
Suggested Citation: Suggested Citation