Raymond R. Tjandrawinata, Destrina Grace Simanjuntak
This paper analyzes the impact of mergers and acquisitions (M&A) activities in research-based pharmaceutical companies, specifically the impact of R&D expenditure, sales revenue, and R&D intensity on firms’ productivity, on drug approval in pharmaceutical industries following M&A activities. The model was estimated using annual data, gathered from eight large research-based pharmaceutical companies in the world post-M&A, during the period 2003 until 2010. The regression analysis method uses a pooled regression method with generalized least square (GLS) analysis. The result further shows that following M&A activities, firms’ one-year lagged sales revenue (t-1) and R&D intensity to be positive in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries, while, surprisingly firms’ one-year lagged R&D expenditure (t-1) have a negative impact in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries.
{"title":"The Impact of Mergers and Acquisitions in Research-Based Pharmaceutical Companies on Productivity","authors":"Raymond R. Tjandrawinata, Destrina Grace Simanjuntak","doi":"10.2139/ssrn.1981889","DOIUrl":"https://doi.org/10.2139/ssrn.1981889","url":null,"abstract":"This paper analyzes the impact of mergers and acquisitions (M&A) activities in research-based pharmaceutical companies, specifically the impact of R&D expenditure, sales revenue, and R&D intensity on firms’ productivity, on drug approval in pharmaceutical industries following M&A activities. The model was estimated using annual data, gathered from eight large research-based pharmaceutical companies in the world post-M&A, during the period 2003 until 2010. The regression analysis method uses a pooled regression method with generalized least square (GLS) analysis. The result further shows that following M&A activities, firms’ one-year lagged sales revenue (t-1) and R&D intensity to be positive in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries, while, surprisingly firms’ one-year lagged R&D expenditure (t-1) have a negative impact in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121565209","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I analyze a firm making a decision of whether to expose itself to risk in an exogenous parameter when the firm can change a choice variable after observing the realization of the exogenous parameter. For example, whether to choose an advertising campaign with a less certain outcome, when the firm can adjust the product's price after seeing the effects of the campaign. I show that in many cases the firm wants to expose itself to risk and I outline general conditions that need to be satisfied for this result. I then analyze the strategic version of this setup with two competing firms, provide a general characterization, and show that in many cases both firms want to expose themselves to risk, as long as the risks are not too positively correlated. For example, many linear demand and constant marginal cost settings (monopoly, differentiated Bertrand, or differentiated Cournot firms selling substitutes) where the exogenous parameter is a demand or a marginal cost shifter results in the monopolist (or both of the competitors if the risks are not too positively correlated) voluntarily exposing themselves to risk.
{"title":"When Should Firms Expose Themselves to Risk","authors":"A. Alexandrov","doi":"10.2139/ssrn.1880062","DOIUrl":"https://doi.org/10.2139/ssrn.1880062","url":null,"abstract":"I analyze a firm making a decision of whether to expose itself to risk in an exogenous parameter when the firm can change a choice variable after observing the realization of the exogenous parameter. For example, whether to choose an advertising campaign with a less certain outcome, when the firm can adjust the product's price after seeing the effects of the campaign. I show that in many cases the firm wants to expose itself to risk and I outline general conditions that need to be satisfied for this result. I then analyze the strategic version of this setup with two competing firms, provide a general characterization, and show that in many cases both firms want to expose themselves to risk, as long as the risks are not too positively correlated. For example, many linear demand and constant marginal cost settings (monopoly, differentiated Bertrand, or differentiated Cournot firms selling substitutes) where the exogenous parameter is a demand or a marginal cost shifter results in the monopolist (or both of the competitors if the risks are not too positively correlated) voluntarily exposing themselves to risk.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128769703","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper we introduce and empirically demonstrate a new model of economic development that we call Portfolio Economic Development. Our approach borrows from portfolio theory in finance and focuses on the risk-return nature of development projects. The paper examines how the loss of a dominant industry group from an island economy causes significant economic problems and how those problems might be mitigated by developing the economy in a portfolio context. The approach can help planners select optimal mixes of projects for development of any economy experiencing a transitional period.
{"title":"A Portfolio Approach to Economic Development","authors":"T. Vu, Terrance Jalbert, David L. Hammes","doi":"10.19030/JABR.V26I2.285","DOIUrl":"https://doi.org/10.19030/JABR.V26I2.285","url":null,"abstract":"In this paper we introduce and empirically demonstrate a new model of economic development that we call Portfolio Economic Development. Our approach borrows from portfolio theory in finance and focuses on the risk-return nature of development projects. The paper examines how the loss of a dominant industry group from an island economy causes significant economic problems and how those problems might be mitigated by developing the economy in a portfolio context. The approach can help planners select optimal mixes of projects for development of any economy experiencing a transitional period.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"30 3","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120851017","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A vast deal of research presenting evidence on the benefits of international diversification has been published. The empirical studies came to rather diverse conclusions as the authors used different sampling data, analyzed different countries within a different time period. The purpose of this paper is to analyze the degree of financial integration and benefits of portfolio diversification between the Malaysian equity markets and developed and developing equity markets from Malaysian perspective. The research question is; Is Malaysian financial market integrated to developed and developing markets? It inspects the controversial issues of market segmentation and integration in an emerging market setting, namely Malaysia. In the analysis, the developed and developing equity returns are adjusted for exchange rate fluctuations using Ringgit Malaysia based exchange rates. By employing time series analysis, the paper also seeks to investigate which market actually leads the Malaysian stock market. The research is based on secondary data, existing theories and earlier studies regarding international integration of stock market movements. The methodology utilizes standard co integration analysis, vector error correction model and portfolio theory. We also rely on variance decomposition and impulse response functions to gauge the strength of the interactions among the variables. This study contains secondary data for the period of 1999 to 2008.The study comprises monthly closing Morgan Stanley Composite Index (MSCI) indices of twenty developed and developing countries. The findings from the analysis could be useful to fund managers in their essential decision for portfolio management. The findings may also be of interest to policy makers interested in stock market co movement, since internationalization of markets could represent significant capital inflow or outflow and thus influence savings and consumption decisions.
{"title":"Financial Integration and International Diversification Benefits: Cross Country Evidence from a Malaysian Perspective","authors":"Surianor Kamaralzaman, F. Samad, M. Isa","doi":"10.2139/ssrn.1639710","DOIUrl":"https://doi.org/10.2139/ssrn.1639710","url":null,"abstract":"A vast deal of research presenting evidence on the benefits of international diversification has been published. The empirical studies came to rather diverse conclusions as the authors used different sampling data, analyzed different countries within a different time period. The purpose of this paper is to analyze the degree of financial integration and benefits of portfolio diversification between the Malaysian equity markets and developed and developing equity markets from Malaysian perspective. The research question is; Is Malaysian financial market integrated to developed and developing markets? It inspects the controversial issues of market segmentation and integration in an emerging market setting, namely Malaysia. In the analysis, the developed and developing equity returns are adjusted for exchange rate fluctuations using Ringgit Malaysia based exchange rates. By employing time series analysis, the paper also seeks to investigate which market actually leads the Malaysian stock market. The research is based on secondary data, existing theories and earlier studies regarding international integration of stock market movements. The methodology utilizes standard co integration analysis, vector error correction model and portfolio theory. We also rely on variance decomposition and impulse response functions to gauge the strength of the interactions among the variables. This study contains secondary data for the period of 1999 to 2008.The study comprises monthly closing Morgan Stanley Composite Index (MSCI) indices of twenty developed and developing countries. The findings from the analysis could be useful to fund managers in their essential decision for portfolio management. The findings may also be of interest to policy makers interested in stock market co movement, since internationalization of markets could represent significant capital inflow or outflow and thus influence savings and consumption decisions.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133851523","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
How do diversifying firms chose their target industries? We use two population-level samples and new measures of relatedness to decompose the determinants of diversifying entry into internal factors (firm-specific resources and capabilities) and external factors (industry attractiveness). Our approach captures a variety of sources and types of relatedness and includes measures of resource strength as well as resource relevance, giving us a highly general picture of the drivers of diversification.
{"title":"Why There? Decomposing the Choice of Target Industry","authors":"Lasse B. Lien, Peter G. Klein","doi":"10.2139/ssrn.1555924","DOIUrl":"https://doi.org/10.2139/ssrn.1555924","url":null,"abstract":"How do diversifying firms chose their target industries? We use two population-level samples and new measures of relatedness to decompose the determinants of diversifying entry into internal factors (firm-specific resources and capabilities) and external factors (industry attractiveness). Our approach captures a variety of sources and types of relatedness and includes measures of resource strength as well as resource relevance, giving us a highly general picture of the drivers of diversification.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-02-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124617422","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2009-06-01DOI: 10.4468/2009.2.04GNECCHI
F. Gnecchi
In over-supplied markets, companies that have developed market-driven management policies have proved to be able to sustain their proposals, to achieve remunerative income flows and to generate financial resources. A market-driven company is aware of the fact that the opportunities embodied by globalisation are not limited to a mere advantage in terms of reduced costs, but generate conditions for a competitive approach to the market. By revisiting the concept of ‘space’, market-driven businesses focus their commitment on understanding the customer’s assessment; they therefore define their own supply so that they can propose performance that is superior to that guaranteed by competitors. In this context, which determines a clear value proposition, companies have realised that by developing market-space management they can not only modify relations with customers, but even foster the development of collaboration agreements with partners (strategic alliances).
{"title":"Market-Driven Management, Market Space and Value Proposition","authors":"F. Gnecchi","doi":"10.4468/2009.2.04GNECCHI","DOIUrl":"https://doi.org/10.4468/2009.2.04GNECCHI","url":null,"abstract":"In over-supplied markets, companies that have developed market-driven management policies have proved to be able to sustain their proposals, to achieve remunerative income flows and to generate financial resources. A market-driven company is aware of the fact that the opportunities embodied by globalisation are not limited to a mere advantage in terms of reduced costs, but generate conditions for a competitive approach to the market. By revisiting the concept of ‘space’, market-driven businesses focus their commitment on understanding the customer’s assessment; they therefore define their own supply so that they can propose performance that is superior to that guaranteed by competitors. In this context, which determines a clear value proposition, companies have realised that by developing market-space management they can not only modify relations with customers, but even foster the development of collaboration agreements with partners (strategic alliances).","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"148 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133795325","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The global financial crisis has created a structural break in the global economy. Businesses thus need to reassess the strategies they have developed to operate in a highly integrated global economy. Initial reactions have often been defensive as companies downsize and call for government support. However, times of crisis are also times of opportunity. In the short-term, opportunities arise for instance in 'value for money' segments. Long term opportunities require managers to develop foresight to use the crisis to position themselves for the next upswing. Business leaders thus need to develop scenarios of the new economy, and envisage their role in it.The current public debate largely focuses on the origins of the crisis, yet it is time look forward to address the question, how can businesses survive the crisis, and position themselves for the recovery whenever it may come? This paper aims to initiate this forward-looking debate. The main focus thus is on generating ideas on how to move forward, rather than to provide definitive answers.
{"title":"Corporate Strategies during the Global Downturn: Initiating a Forward-Looking Debate","authors":"K. Meyer","doi":"10.2139/ssrn.1373024","DOIUrl":"https://doi.org/10.2139/ssrn.1373024","url":null,"abstract":"The global financial crisis has created a structural break in the global economy. Businesses thus need to reassess the strategies they have developed to operate in a highly integrated global economy. Initial reactions have often been defensive as companies downsize and call for government support. However, times of crisis are also times of opportunity. In the short-term, opportunities arise for instance in 'value for money' segments. Long term opportunities require managers to develop foresight to use the crisis to position themselves for the next upswing. Business leaders thus need to develop scenarios of the new economy, and envisage their role in it.The current public debate largely focuses on the origins of the crisis, yet it is time look forward to address the question, how can businesses survive the crisis, and position themselves for the recovery whenever it may come? This paper aims to initiate this forward-looking debate. The main focus thus is on generating ideas on how to move forward, rather than to provide definitive answers.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129109602","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2009-01-01DOI: 10.1111/j.1468-0327.2009.00218.x
Nicolas Coeurdacier, Roberto A. De Santis, Antonin Aviat
Cross-border mergers and acquisitions activities (MA (2) joining the EU favoured both horizontal and vertical mergers; (3) policy-makers can help attract capital by reducing the corporate tax rates and the degree of product market regulations and by improving the country's financial systems; (4) the service industry has not yet fully benefited from European integration because the level of protection and barriers to entry in the services sector act as a strong deterrent to cross-border M&As in services.
{"title":"Cross-Border Mergers and Acquisitions and European Integration","authors":"Nicolas Coeurdacier, Roberto A. De Santis, Antonin Aviat","doi":"10.1111/j.1468-0327.2009.00218.x","DOIUrl":"https://doi.org/10.1111/j.1468-0327.2009.00218.x","url":null,"abstract":"Cross-border mergers and acquisitions activities (MA (2) joining the EU favoured both horizontal and vertical mergers; (3) policy-makers can help attract capital by reducing the corporate tax rates and the degree of product market regulations and by improving the country's financial systems; (4) the service industry has not yet fully benefited from European integration because the level of protection and barriers to entry in the services sector act as a strong deterrent to cross-border M&As in services.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123961920","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The study focuses on the manner in which diversification strategy is applied to the pharmaceutical industry. The paper deals with diversification business models, such as the blockbuster model and the generic drugs model. Also, an important trend in the pharmaceutical industry is related to mergers and acquisitions, as well as the choice between diversification and focus. By way of conclusion, I offered the situation of the Romanian pharmaceutical industry, which will probably undergo important changes in the years to come.
{"title":"Diversification Strategy in the Pharmaceutical Industry","authors":"Ruxandra Ciulu","doi":"10.2139/ssrn.1283129","DOIUrl":"https://doi.org/10.2139/ssrn.1283129","url":null,"abstract":"The study focuses on the manner in which diversification strategy is applied to the pharmaceutical industry. The paper deals with diversification business models, such as the blockbuster model and the generic drugs model. Also, an important trend in the pharmaceutical industry is related to mergers and acquisitions, as well as the choice between diversification and focus. By way of conclusion, I offered the situation of the Romanian pharmaceutical industry, which will probably undergo important changes in the years to come.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-10-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130412993","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Is it too much to pay target firm shareholders a 50% premium on top of market price? Or is it too much to pay a 100% premium when pursuing mergers and acquisitions? How much is too much? In this paper, we examine how the extent of merger premiums paid impacts both the long-run and announcement period stock returns of acquiring firms. We find no evidence that acquirers paying high premiums underperform those paying relatively low premiums in three years following mergers, and the result is robust after controlling for a variety of firm and deal characteristics. Short term cumulative abnormal returns are moreover positively correlated to the level of the premium paid by acquirers. Our evidence therefore suggests that high merger premiums paid are unlikely to be responsible for acquirers' long-run post merger underperformance.
{"title":"How Much is Too Much: Are Merger Premiums Too High?","authors":"Antonios Antoniou, Philippe Arbour, Huainan Zhao","doi":"10.2139/ssrn.884244","DOIUrl":"https://doi.org/10.2139/ssrn.884244","url":null,"abstract":"Is it too much to pay target firm shareholders a 50% premium on top of market price? Or is it too much to pay a 100% premium when pursuing mergers and acquisitions? How much is too much? In this paper, we examine how the extent of merger premiums paid impacts both the long-run and announcement period stock returns of acquiring firms. We find no evidence that acquirers paying high premiums underperform those paying relatively low premiums in three years following mergers, and the result is robust after controlling for a variety of firm and deal characteristics. Short term cumulative abnormal returns are moreover positively correlated to the level of the premium paid by acquirers. Our evidence therefore suggests that high merger premiums paid are unlikely to be responsible for acquirers' long-run post merger underperformance.","PeriodicalId":375570,"journal":{"name":"Diversification Strategy & Policy eJournal","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122962584","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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