Authors: Maria Morati, Michael Bekiaris

Title: A financial analysis of the pharmaceutical industry: exploring the effect of the eurozone crisis

Abstract

This study aims at examining whether the recent crisis in the Eurozone has influenced the performance of listed pharmaceutical firms both in the countries with fiscal weaknesses (peripheral countries) and the core Eurozone countries (core countries). Literature suggests that during a financial crisis, investors are more concerned with financial performance and corporate profitability since corporate profits are more volatile and companies could suffer great losses. As previous studies have already demonstrated the strong causal relationship between the financial performance and industry growth indicators (Moore &Mirzaei 2014), we employed specific financial indicators in order to explore whether the crisis has affected the pharmaceutical industry in Eurozone economies. In order to do so we checked whether the pharmaceutical companies’ performance is affected by firm-specific factors or regional factors. The selected variables have shown if the industry’s performance moves in the same direction with the struggling economy or not. Since globalization and the establishment of a common currency in the Eurozone have changed the way we treat the markets and interdependencies are getting stronger, we use panel data on a multiple linear regression model (Klapper& Love 2011; Moore &Mirzaei 2014). Our analysis has been based on an ordinary least squares method. We used annual data from 2008 to 2013 and we break the sample into two sub-samples (core and peripheral countries). The results support that the performance of the pharmaceutical industry at core countries during the crisis seems to strongly depend on country-specific variables, while on the other hand the peripheral pharmaceutical industry do not move concurrently with the business cycle.