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The impact of mergers and acquisitions on shareholders' value: an empirical study of pharmaceutical companies

Gimede Gigante (Department of Finance, Bocconi University, Milan, Italy)
Andrea Cerri (Universita Cattolica del Sacro Cuore, Milano, Italy)
Giuseppe Leone (Bocconi University, Milan, Italy)

Managerial Finance

ISSN: 0307-4358

Article publication date: 12 January 2023

Issue publication date: 13 July 2023




This research investigates the effect of mergers and acquisition (M&A) transactions in the pharmaceutical sector. The study assesses the short-term value creation or destruction for shareholders of pharmaceutical companies involved in M&A activities on the acquiring side.


The empirical analysis is carried out by applying the event study methodology in order to define the cumulative abnormal return for each transaction observed. Then, the correlations between abnormal returns and economic metrics are determined building a multiple regression model. These metrics refers to the acquirer, target or to the deal itself.


Evidence show a short-term value creation for shareholders of pharmaceutical companies involved in M&A transactions on the acquiring side. On the one hand, the analysis suggests a negative correlation between the value creation and the acquiring firm's level of indebtedness. On the other hand, the value creation is positively correlated with target's metrics such as Return on Equity (ROE), Return on Assets (ROA) and Research and Development (R&D) intensity. Value creation is also tied to deal-specific characteristics regarding the cash used in the transaction and the comparative extent of the deal.

Practical implications

This analysis allows to predict returns around an announcement day considering the described indicators of value creation or destruction. M&As play a key role in the strategy implementation as reaction to exogenous shocks and endogenous needs.


This study enriches the literature of corporate finance applied to the pharmaceutical sector. Indeed, this industry is gaining increasing relevance in the M&A panorama. Thus, the related dynamics need to be assessed considering the uniqueness of the pharmaceutical sector in terms of regulation, stakeholders and social impact.



The authors thank Francesco Toti for his research assistance.


Gigante, G., Cerri, A. and Leone, G. (2023), "The impact of mergers and acquisitions on shareholders' value: an empirical study of pharmaceutical companies", Managerial Finance, Vol. 49 No. 8, pp. 1241-1264.



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