Pricing the Unseen: How Intangible Assets Affect Investor Reactions to Payment Choice in Public M&A

Sammanfattning

This paper investigates whether target intangible asset intensity moderates the well-documented stock-payment discount in bidder announcement returns for acquisitions of publicly traded targets. In particular, the analysis examines whether stock payment functions as a risk-sharing mechanism under valuation uncertainty. Using data on public U.S. mergers and acquisitions from 2000 to 2022, the results confirm the persistence of a stock-payment discount. However, no robust evidence is found that this discount is attenuated for targets with higher intangible intensity. These findings suggest that, in acquisitions of publicly traded targets, target intangible asset intensity does not materially influence how investors interpret the choice of payment. Accordingly, stock payment does not appear to function as a risk-sharing mechanism in this setting. Overall, the paper contributes by providing updated evidence on the stock-payment discount and by examining whether target-side valuation uncertainty, proxied by intangible asset intensity, helps explain variation in bidder announcement returns.