Financial Determinants of Market Reactions to FDA Drug Approvals in the Biopharmaceutical Sector
Author
Antony, Jenisten
Term
4. semester
Publication year
2025
Submitted on
2025-06-02
Abstract
Denne specialeafhandling undersøger, hvordan virksomheders finansielle karakteristika former aktiemarkedets reaktioner på FDA-godkendelser i den amerikanske biopharmaceutiske sektor. Med et eventstudie-design og panelregressioner på data fra 2014 til 2024 analyseres unormale afkast omkring godkendelsesmeddelelser, og om variationen kan forklares af størrelse, FoU-intensitet, capex-intensitet, lønsomhed og aktivomsætning. Overordnet giver godkendelser signifikant positive unormale afkast, men effekten varierer systematisk på tværs af virksomheder: mindre selskaber og virksomheder med høj FoU-intensitet oplever stærkere kursreaktioner, mens højere lønsomhed og større kapitaludgifter er forbundet med svagere reaktioner. Resultater på subsektorniveau (Non-System-Specific, System-Specific og Other) viser yderligere forskelle i tråd med forskellige forretningsmodeller. Fundene indikerer, at investorer fortolker FDA-godkendelser gennem virksomheders fundamentale forhold, og giver praktiske indsigter for investorer, ledere og regulatorer, der vil forstå, hvordan finansiel struktur påvirker markedsresponsen på reguleringsbegivenheder.
This thesis examines how firm-level financial characteristics shape stock market reactions to FDA drug approval announcements among U.S. biopharmaceutical companies. Using an event study design and panel regressions on 2014–2024 data, it analyzes abnormal returns around approval dates and assesses whether variation is explained by size, R&D intensity, capital expenditure intensity, profitability, and asset turnover. Overall, approvals are associated with significant positive abnormal returns, but the magnitude differs systematically across firms: smaller firms and those with higher R&D intensity experience stronger reactions, while higher profitability and heavier capital expenditures are linked to weaker responses. Subsector analyses (Non-System-Specific, System-Specific, and Other) reveal additional variation consistent with differing business models. The findings suggest investors interpret FDA approvals through the lens of firm fundamentals and offer practical implications for investors, managers, and regulators seeking to understand how financial structure influences market responses to regulatory events.
[This abstract was generated with the help of AI]
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