Improved Clinical Trial Disclosures, Market Reaction and Economic Consequence




Hao, Jun

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This dissertation consists of three essays that will examine nonfinancial disclosures of clinical trial status within the pharmaceutical industry. Essay I tests whether financial analysts use the information contained in the clinical trial disclosures to improve their forecast accuracy. Findings indicate that the improved clinical trial disclosures significantly decrease analysts' long-term earnings forecast error. Essay II seeks to determine whether the improved clinical trial disclosures affect pharmaceutical companies' cost of equity capital. The results suggest that a voluntary disclosure of drug portfolio per se is associated with a higher cost of equity capital, however, once the disclosure process is quasi-regulated, the magnitude of such positive association is significantly weakened. Essay III examines the market reaction to proposed or enacted regulatory changes associated with the improvement of clinical trial disclosures. Findings indicate that the market, in general, responses negatively to proposed or enacted regulatory changes that require both registration and result disclosure for clinical trials. Overall, this dissertation contributes to the accounting literature regarding non-financial disclosures by evaluating the consequences of improved clinical trial disclosures for analysts' forecast accuracy and cost of equity capital, and assessing the market reaction to regulation changes aiming to improve such disclosures.


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Analyst Forecast, Clinical Trial Status, Cost of Capital, Market Reaction, Non-financial Disclosure, Pharmaceutical Companies