Does Financing Policy Impact the Financial Performance of the Pharmaceutical Companies in Europe and the United States of America?

Abstract

In this paper, the research is focused on the empirical study regarding the impact of financing policy on the companies’ financial performance from the pharmaceutical sector, in Europe and in the United States of America, considering that these two geographic areas were strongly involved in the supply of medicine, in the COVID-19 pandemic crisis. To identify the most representative determinants of the companies’ financial performance, from the financing policy perspective, there were investigated a series of studies from the international literature and there were formulated research hypotheses. The database consists of 466 companies, over a period of 10 years, respectively 2012-2021, cumulating a number of 4660 statistical observations, which are used to estimate multiple regression models, with panel data, unbalanced, linear, with no effects, with fixed effects or with random effects. The dependent variables, according to which the empirical models were estimated, are Return on Assets, Return on Equity and Price Earnings Ratio. The independent variables are represented by long-term indebtedness, short-term indebtedness, net debt, current ratio, effective tax rate, asset tangibility, being also used control variables such as dividend payout ratio and company size, measured by turnover and market capitalization. The results highlight, mainly, the negative influence of indebtedness on Return on Assets and Return on Equity, respectively positive influence on Price Earnings Ratio. Furthermore, the results of the empirical models are interpreted from a statistical and economic point of view, by referring to the hypotheses formulated based on previous studies.