FDA Drug Approvals: Time Is Money!

Andreas Sturm, Michael J. Dowling and Klaus Röder
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Andreas Sturm: University of Regensburg, Germany
Michael J. Dowling: University of Regensburg, Germany
Klaus Röder: University of Regensburg, Germany

Journal of Entrepreneurial Finance, 2007, vol. 12, issue 2, 23-54

Abstract: We investigated the stock price behavior of public pharmaceutical and biotechnology companies upon approval of a drug by the Food and Drug Administration (FDA). Using event study methodology, we examine the reaction caused by the approval, seperating it from the asset price movements caused by other factors such as market and industry effects. The results are then used to validate the model developed in this article as an alternative to the explanations given by Sharma and Lacey (2004). The results of this study support the Efficient Market Hypothesis, i.e. that the market reacts to the new information quickly and clearly.

Keywords: FDA; Pharmaceuticals; Efficient Markets Hypothesis; EMH (search for similar items in EconPapers)
JEL-codes: G14 M13 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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