Consequences of Disclosing Clinical Trial Results: Evidence from the Food and Drug Administration Amendments Act

53 Pages Posted: 5 Aug 2020

See all articles by Thomas Bourveau

Thomas Bourveau

Columbia Business School - Accounting, Business Law & Taxation

Vedran Capkun

HEC Paris - Accounting and Management Control Department

Yin Wang

Singapore Management University - School of Accountancy

Date Written: February 6, 2020

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.

Keywords: disclosure, information asymmetry, clinical trial, regulation

JEL Classification: M41, M48, I18

Suggested Citation

Bourveau, Thomas and Capkun, Vedran and Wang, Yin, Consequences of Disclosing Clinical Trial Results: Evidence from the Food and Drug Administration Amendments Act (February 6, 2020). Singapore Management University School of Accountancy Research Paper Forthcoming, HEC Paris Research Paper No. ACC-2020-1365, Available at SSRN: https://ssrn.com/abstract=3533305 or http://dx.doi.org/10.2139/ssrn.3533305

Thomas Bourveau

Columbia Business School - Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

Vedran Capkun

HEC Paris - Accounting and Management Control Department ( email )

Jouy-en-Josas Cedex
France

Yin Wang (Contact Author)

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

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