The Relative Importance of Information Disclosures in the Biotechnology Industry

Abstract

This study assesses the relative information content of non-financial disclosures by biotechnology healthcare firms in a multiple disclosure context. Prior research has focused on valuation relevance and provides mixed results regarding the importance of non-financial information for the biotech industry. We find that non-financial disclosures have significant information content and document: (i) higher information content for late stage vs. early stage drug development disclosures; (ii) negative non-financial disclosures being more informative than similar good news disclosures; and (iii) higher information content for many non-financial events relative to earnings announcement information. Supplemental testing indicates that all negative (and many positive) non-financial disclosures tested have significant information content over wide-window horizons. In addition, we find that non-financial disclosures are more significant for start-up vs. mature biotech firms, and that biotech healthcare firms appear to be acting strategically with their non-financial information disclosures.