Examining the Determinants of Profitability in the Pharmaceutical Industry

This chapter examines the profitability determinants for a segment of the U.S. pharmaceutical industry using several measures of profitability. Following on from previous research, author tests the hypothesis that profitability is related to the functions performed and risks assumed by a company. Similar to earlier studies, the findings vary depending on the profitability metric used, meaning that the relevance of the independent variables may change. These data showed that the estimating approach had no systematic impact on the outcomes. But, this study implies that the findings depend on the industry under study.