Value Creation in the Biotechnology Industry (ABSTRACT)
McConomy, B., & Xu, B.
published: 2004 | Research publication | Magazine Article
McConomy, B., & Xu, B. (2004). "Value Creation in the Biotechnology Industry". CMA Management (Feature Article), 78(2), pp. 28-31.
ABSTRACT: Non-financial performance indicators are certainly critical in valuation for the fast growing biotechnology sector. In today's business environment, characterized by factors such as global competition, decentralization, and off-balance sheet intangible assets, financial statement information has lost much of its ability to summarize value creation activities - particularly for emerging industries, including biotechnology and certain high technology sectors. Increasingly, disclosure strategy and disclosure management in emerging industries must take into account information such as market penetration, floor space for retailers, R&D, and the number of Web site hits. Firms can manage their disclosures in a variety of ways. The market value of biotech firms is mainly driven by hope - the hope of realized earnings potential stemming from approved drugs. Managers of biotech firms often employ a disclosure strategy to communicate their drug development status, to either strengthen or clarify that hope. Non-financial disclosure fills the information lag between capital markets (stock price) and the accounting system.
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revised Jan 18/06
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