Drug approval decisions: A note on stock liquidity effects

Achim Himmelmann and Dirk Schiereck

Journal of Empirical Finance, 2012, vol. 19, issue 5, 640-652

Abstract: We analyze the relationship between positive stock returns, changes in trading activities, and liquidity improvements following drug approval announcements. Using a unique hand-collected data set on approval decisions in Europe, we find that stock liquidity does change. Stocks temporarily exhibit strong abnormal trading volume, lower spreads, and permanently become more liquid. Our results suggest that the initial positive wealth effect of a new drug release reflects both positive information content and liquidity improvements.

Keywords: Product innovation; Abnormal stock return; Stock liquidity (search for similar items in EconPapers)
JEL-codes: G14 G32 M21 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:19:y:2012:i:5:p:640-652

DOI: 10.1016/j.jempfin.2012.06.001

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