Description
Title: The Impact of Financial Risk-Taking on Pharmaceutical Industry Profitability
Abstract: The COVID-19 pandemic has significantly increased the importance of the commercial and pharmaceutical sectors to the country’s economy. The main goal of this research was to gain a deeper understanding of the key management traits of the sector’s actors. In order to put companies in a better position in the eyes of equity investors, it was believed that more effective management of financial investments (acquisitions, loans) led to higher risk financial investment decisions in the pharmaceutical industry, best exemplified by the profitability of equity (ROE). The restructuring of the industry and the impact of investments in long-term financial instruments on the ROE of the same business entities were also considered as justifications for one potential method of covering the extremely high indirect costs (R&D, marketing) of pharmaceutical companies. Based on the EMIS database, the analysis only used 2019 data from businesses engaged in the Visegrad region’s pharmaceutical sector. Using cluster analysis and linear regression, the authors sought to draw conclusions about potential management traits of the entire pharmaceutical sector of these nations. The study’s initial presumption, or main hypothesis, was that in one of the studied nations or for companies making more than a certain amount of revenue, the effect of a company’s risk-taking (which can also be expressed in terms of asset-based financial income) on profitability may manifest itself or become more pronounced. The conducted studies failed to find a significant correlation between the explanatory and profit variables, either at the level of groups formed by regional market position or at the level of the nation. To put it another way, companies not indebted to suppliers took significant risks in the area of financial investments, offsetting the positive effect of the latter on earnings, which was largely offset by sales of successful cash products.
Keywords: financial risk; profitability; financial investment; ROE; pharmaceutical industry; cluster analysis; linear regression
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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