Article
Efficiency and Book-to-Market Ratios of US Pharaceutical Firms
Journal of Applied Business and Economics
(2022)
Abstract
We examine the effect of sales efficiency on the book-to-market ratios of U.S. pharmaceutical companies and find that efficiency is positively associated with book-to-market ratio, suggesting that efficient companies are, on average, undervalued. Our longitudinal analyses show that companies with smaller asset levels are more efficient during our sample years. Further investigation on benchmarking firms reveals that most of the efficient companies are less profitable. Our slack analysis demonstrates that the most overvalued companies tend to exhibit inefficiencies in research and development and selling, general, and administrative costs; fewer of them are inefficient in cost of goods sold.
Keywords
- book-to-market ratio,
- data envelopment analysis (DEA),
- off-balance sheet investment,
- sale efficiency,
- slack analysis,
- U.S. Pharmaceutical Industry
Disciplines
Publication Date
Fall June 20, 2022
DOI
https://doi.org/10.33423/jabe.v24i3
Citation Information
Shaowen Hua, Gary P. Schneider and Pingjun Jiang. "Efficiency and Book-to-Market Ratios of US Pharaceutical Firms" Journal of Applied Business and Economics Vol. 24 Iss. 3 (2022) p. 169 - 184 ISSN: 1499-691X Available at: http://works.bepress.com/shaowen-hua/6/