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Long-term value creation in the pharmaceutical sector: an event study analysis of big pharma stocks

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  • Andrija Tomovic
  • Erdal Atukeren

Abstract

We investigate the drivers of value creation in big pharmaceutical firms. We use a unique dataset of a total of 2,200 news items on research and development (R%D) progress announcements and dividend news of 25 largest pharmaceutical companies for the period 1998-2010. Our findings affirm the role of successful R%D as a driver of value creation in the long-run. This long term view of value creation has implications for sustainability. R%D is a critical input to long-term sustainable growth and the pharmaceutical sector is one of the highest R%D-intense sectors. Furthermore, successful R%D leading to the discovery of new drugs enhances the prospects for a sustainable economy by improving the society's health status and well-being. Indeed, we find that negative R%D news destroys more long-term value than the value created by positive news. This highlights the concern for the overall long-term adverse implications of unsuccessful R%D on the economy.

Suggested Citation

  • Andrija Tomovic & Erdal Atukeren, 2012. "Long-term value creation in the pharmaceutical sector: an event study analysis of big pharma stocks," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 4(4), pages 370-389.
    • Handle: RePEc:ids:ijsuse:v:4:y:2012:i:4:p:370-389
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    Cited by:

    1. Semen Budennyy & Alexey Kazakov & Elizaveta Kovtun & Leonid Zhukov, 2022. "New drugs and stock market: how to predict pharma market reaction to clinical trial announcements," Papers 2208.07248, arXiv.org, revised Aug 2022.

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