Abstract
Mergers and acquisitions are often motivated by the intention of creating value from intangible assets. We develop a novel word list of and apply it to takeover announcements. Deals presented with more intangibles complete more quickly. However, the value of these deals to the acquirer is questionable: One standard deviation more in talk results in 0.45 percentage points lower abnormal announcement returns of bidders. Agency problems explain little of these results. Instead, payment mode choices and insider trades suggest that talk reflects managerial overoptimism. Overall, takeover announcements can provide important information regarding the quality of deals.
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