The role of mergers and acquisitions in mitigating the effects of corporate fraud in the pharmaceutical sector

Abstract

Purpose

In today’s highly comparative pharmaceutical sector, multiple humanitarian and pricing issues are prevalent within the industry. Mergers and acquisitions (M&A) are perceived to be an essential method for organizational consolidation and value generation. The purpose of this paper is to illustrate via descriptive methodology and t-tests, how a merger can mitigate the effects of fraud in the pharmaceutical sector.

Design/methodology/approach

The research focuses on secondary data. This research paper explores the differences in these organizations’ financial metrics using the t-test regression analysis, both pre and post-merger. Secondary data have been used to compile separate financial ratios for five years before and five years after the scandal.

Findings

The results indicate a positive outlook for both organizations after the merger. Mergers appear to have a favorable impact on the performance of a company, with the only exception of external variables (laws, controversies, fines, etc.) affecting its post-merger performance.

Originality/value

The paper uses secondary data to test the impact that mergers have on pharmaceutical companies after they have been implicated in corporate malfeasance.

Citation

Lokanan, M.E. and Fernandes, S.A. (2022), "The role of mergers and acquisitions in mitigating the effects of corporate fraud in the pharmaceutical sector", Journal of Financial Crime, Vol. 29 No. 1, pp. 4-19. https://doi.org/10.1108/JFC-12-2020-0243