Intangible assets’ communication is essential for stakeholder to grasp the companies’ knowledge potential. Despite the annual report is largely inadequate to communicate intangibles value because of accounting requirements, it offers a unique chance of representing intangibles acquired in M&A. Prior evidence shows that opportunistic behaviours drive such allocation reducing the reporting transparency about the display of the acquired intangibles. However, according to the signalling theory, companies are more likely to provide information about intangibles when the proprietary costs of revealing know-how do not outweigh the benefits achievable by reducing the information asymmetry. The paper aims at investigating the representation of the intangibles’ value depending on the companies’ innovation degree. Moving from the argument that innovative companies embrace M&A mainly to acquire intangibles, I hypothesize that such companies are more likely to disclose the value of the intangibles with the aim of reveal the strategic motivations to the price paid. The paper offers empirical evidence about the communication in the annual report of the intangibles acquired in a M&A comparing innovative companies and traditional ones. The findings confirm that innovative companies are more inclined than traditional companies to disclose information about the acquired intangibles. Furthermore, companies that minimize the intangibles disclosure are those acquiring target companies operating in the same industry, indicating that the acquisition is driven by expected synergies instead of identifiable intangibles. Such distinction suggests that the annual report enable managers to reveal the strategic reasons motivating the deal value. Innovative companies are inclined to reveal the source of their innovation to protect their knowledge. Inferences contributes to the literature showing that the annual report may be a communication channel for the corporate knowledge. The evidence offers practical implication for managers and stakeholders about the annual report’s aptitude to communicate the knowledge potential that is incorporated or in the specific intangibles or in the expected synergies.

The Annual Report as a Chance to Communicate Knowledge: Intangible Assets in Innovative Companies

Francesca Rossignoli
2021

Abstract

Intangible assets’ communication is essential for stakeholder to grasp the companies’ knowledge potential. Despite the annual report is largely inadequate to communicate intangibles value because of accounting requirements, it offers a unique chance of representing intangibles acquired in M&A. Prior evidence shows that opportunistic behaviours drive such allocation reducing the reporting transparency about the display of the acquired intangibles. However, according to the signalling theory, companies are more likely to provide information about intangibles when the proprietary costs of revealing know-how do not outweigh the benefits achievable by reducing the information asymmetry. The paper aims at investigating the representation of the intangibles’ value depending on the companies’ innovation degree. Moving from the argument that innovative companies embrace M&A mainly to acquire intangibles, I hypothesize that such companies are more likely to disclose the value of the intangibles with the aim of reveal the strategic motivations to the price paid. The paper offers empirical evidence about the communication in the annual report of the intangibles acquired in a M&A comparing innovative companies and traditional ones. The findings confirm that innovative companies are more inclined than traditional companies to disclose information about the acquired intangibles. Furthermore, companies that minimize the intangibles disclosure are those acquiring target companies operating in the same industry, indicating that the acquisition is driven by expected synergies instead of identifiable intangibles. Such distinction suggests that the annual report enable managers to reveal the strategic reasons motivating the deal value. Innovative companies are inclined to reveal the source of their innovation to protect their knowledge. Inferences contributes to the literature showing that the annual report may be a communication channel for the corporate knowledge. The evidence offers practical implication for managers and stakeholders about the annual report’s aptitude to communicate the knowledge potential that is incorporated or in the specific intangibles or in the expected synergies.
978-1-914587-07-8
Intangibles
Annual report
Communication
Knowledge
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11562/1047624
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