The Determinants Of Profitability In The Pharmaceutical Industry

Abstract

This paper uses several measures of profitability to examine the determinants of profitability for a segment of the U.S. pharmaceutical industry. Following Leahy (1998, 2004), I test the proposition that profitability is related to the functions performed and risks assumed by a company. As in those studies, the results vary according to the measure of profitability employed, i.e., the significance of the independent variables may depend on the profitability measure employed. These findings are consistent with those of Leahy (1998, 2004), which found that the results did not vary systematically according to estimation method. In addition, this paper suggests that the results vary with the industry examined.