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The Share Price Effect of CVS Health’s Announcement to Stop Selling Tobacco: A Comparative Case Study Using Synthetic Controls

Author

Listed:
  • Andersen Martin

    (UNC Greensboro, Department of Economics, 516 Stirling Street, Greensboro, NC 27412, USA)

  • Bauhoff Sebastian

    (Center for Global Development, 2055 L St NW, Washington, District of Columbia 20036, USA)

Abstract

We study how the announcement by CVS Health, a large US-based pharmacy chain, to stop selling tobacco products affected its share price and that of its close competitors, as well as major tobacco companies. Combining event study and synthetic control methodologies we compare measures of CVS’s stock market valuation with those of a peer group consisting of large publicly listed firms that are part of Standard & Poor’s S&P 500 stock market index. CVS’s announcement is associated with a short-term decrease in its share price, whereas close competitors have benefitted from CVS’ decision. We also find a negative share price effect for Altria, the largest US domestic tobacco firm. Overall our findings are consistent with markets expecting consumers to shift from CVS to alternative outlets in the short-run, and interpreting CVS’ decision to drop tobacco products as signal that other firms may follow suit.

Suggested Citation

  • Andersen Martin & Bauhoff Sebastian, 2017. "The Share Price Effect of CVS Health’s Announcement to Stop Selling Tobacco: A Comparative Case Study Using Synthetic Controls," Forum for Health Economics & Policy, De Gruyter, vol. 20(1), pages 1-13, June.
    • Handle: RePEc:bpj:fhecpo:v:20:y:2017:i:1:p:13:n:2
    DOI: 10.1515/fhep-2015-0045
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    References listed on IDEAS

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    More about this item

    Keywords

    event study; share price effects; tobacco control;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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