Stock Market Reaction at the WHO’s Announcement of a Pandemic due to COVID-19 of the French Pharmaceuticals

Purpose: The year 2020 was hit by a unique economic crisis due to disease, Covid-19. It was first identified in December 2019 in China. The WHO, on March 11th, 2020, declared the Covid-19 a pandemic. This research paper aims to investigate the market reaction of the pharmaceutical companies in France on the day that WHO announced the Covid-19 disease to be a pandemic. Design/Methodology/Approach: We apply the classical event study methodology for our purpose. We selected this sector because we considered that a health crisis such big as the coronavirus pandemic would, of course, affect all the industries in various degrees. Still, it will strongly influence the pharmaceutical sector that also has the opportunity/chance of finding a cure (medicines and vaccines) to this disease and stop the crisis. It seems to be the only industry that can fight back such a crisis by finding a cure. Findings: The results show a strong adverse reaction upon this announcement in pharmaceutical companies in contrast to our hypothesis. The French investors perceived this announcement as a negative signal that will affect almost every economic sector, including the pharmaceutical companies. However, since March 18th, 2020, the second day of the government imposed total lockdown, the market reaction turned positive and significant. Practical Implications: The results of this research may be useful for Government decision makers, investors and pharmaceutical companies in order to optimize their strategies and improve their responses to the ongoing pandemic crisis. Originality/Value: The results of this study will be helpful not only to the academicians by enriching the pertinent literature and the politicians and the practitioners. They can benefit from focusing on this sector and determine the appropriate policies and measures for its growth in finding the means to fight this health crisis.