1. Consequences of Disclosing Clinical Trial Results: Evidence from the Food and Drug Administration Amendments Act
- Author
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Thomas Borveau, Yin Wang, Vedran Capkun, Hong Kong University of Science and Technology (HKUST), Groupement de Recherche et d'Etudes en Gestion à HEC (GREGH), Ecole des Hautes Etudes Commerciales (HEC Paris)-Centre National de la Recherche Scientifique (CNRS), Institut Jean-Pierre Bourgin (IJPB), AgroParisTech-Université Paris-Saclay-Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement (INRAE), and HEC Paris Research Paper Series
- Subjects
Product Problem ,050208 finance ,Medical device ,information asymmetry ,business.industry ,05 social sciences ,Accounting ,clinical trial ,regulation ,050201 accounting ,JEL: I - Health, Education, and Welfare/I.I1 - Health/I.I1.I18 - Government Policy • Regulation • Public Health ,Clinical trial ,Food and drug administration ,Information asymmetry ,JEL: M - Business Administration and Business Economics • Marketing • Accounting • Personnel Economics/M.M4 - Accounting and Auditing/M.M4.M41 - Accounting ,0502 economics and business ,Complaint ,[SHS.GESTION]Humanities and Social Sciences/Business administration ,Business ,JEL: M - Business Administration and Business Economics • Marketing • Accounting • Personnel Economics/M.M4 - Accounting and Auditing/M.M4.M48 - Government Policy and Regulation ,Adverse effect ,disclosure ,Capital market ,health care economics and organizations - Abstract
We examine how the U.S. Food and Drug Administration Amendments Act (FDAAA) of 2007, which requires additional disclosures regarding clinical trial results, impacts information asymmetry between the disclosing pharmaceutical firm and capital market participants, the general public, academics, and practitioners. We document a reduction in information asymmetry in capital markets. We also document an increase in adverse event and product problem complaint reports filed against the pharmaceutical firms to the FDA and a higher number of drug and medical device recalls for affected firms after the FDAAA enactment. Finally, cross-sectional analyses suggest that the increase in FDA complaint reports and recalls after the FDAAA enactment was more prominent in firms with a higher bid-ask spread decrease. Taken together, our results suggest that the FDAAA has some benefits for both investors and consumers.
- Published
- 2020