Consequences of Disclosing Clinical Trial Results: Evidence from the Food and Drug Administration Amendments Act

Thomas Bourveau (1) , Vedran Capkun (2) , Yin Wang (3)

1 HKUST - Hong Kong University of Science and Technology
2 GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC
3 IJPB - Institut Jean-Pierre Bourgin

We examine how the U.S. Food and Drug Administration Amendments Act (FDAAA) of 2007, which requires additional disclosures regarding clinical trial results, impacts information asymmetry between the disclosing pharmaceutical firm and capital market participants, the general public, academics, and practitioners. We document a reduction in information asymmetry in capital markets. We also document an increase in adverse event and product problem complaint reports filed against the pharmaceutical firms to the FDA and a higher number of drug and medical device recalls for affected firms after the FDAAA enactment. Finally, cross-sectional analyses suggest that the increase in FDA complaint reports and recalls after the FDAAA enactment was more prominent in firms with a higher bid-ask spread decrease. Taken together, our results suggest that the FDAAA has some benefits for both investors and consumers.

Keywords: disclosure; information asymmetry; clinical trial; regulation

Domains: Business administration

Thomas Bourveau, Vedran Capkun, Yin Wang. Consequences of Disclosing Clinical Trial Results: Evidence from the Food and Drug Administration Amendments Act. 2020. ⟨hal-02896683⟩