Using a Rasch Model to Rank Big Pharmaceutical Firms by Financial Performance

Authors

  • Thani Jambulingam Saint Joseph's University
  • Carolin Schellhorn Saint Joseph's University
  • Rajneesh Sharma Saint Joseph's University

DOI:

https://doi.org/10.5912/jcb734

Keywords:

biopharmaceutical, ranking, Rasch model, financial peformance

Abstract

We explore a Rasch approach to ranking the top 15 firms in the pharmaceutical industry by their overall financial performance.  Using an initial set of ratios spanning multiple dimensions of firm financial performance, we select the ratios that are compatible with the requirements of the Rasch model for this industry during 2002-2013.  We then identify the firms that most frequently ranked among the top five performers. Three firms stand out as consistently disclosing the required data and showing up at the top of the performance spectrum. Our approach offers a new perspective on the valuation of managers and their firms. 

Author Biographies

Thani Jambulingam, Saint Joseph's University

Thani Jambulingam is Professor in the Department of Pharmaceutical Marketing at St Joseph ’ s University, Erivan K. Haub School of Business, in Philadelphia, Pennsylvania, USA. Currently he teaches both Executive Pharmaceutical and Healthcare MBA program and undergraduate program in Pharmaceutical and Healthcare Marketing. Dr Jambulingam’s research interests are in pharmaceutical strategy, supply chain and pricing. His work has been published in several pharmaceutical marketing, management and operations journals. He worked for major pharmaceutical companies and no also serves as a consultant to several pharmaceutical and biotechnology firms.

Carolin Schellhorn, Saint Joseph's University

Carolin, Schellhorn is Assistant Professor of Finance at Saint Joseph’s University. She teaches both at the undergraduate and graduate programs at the Erivan K. Haub School of Business. Her research interests include sustainability of companies. She has published several papers in refereed academic journals

Rajneesh Sharma, Saint Joseph's University

Rajneesh Sharma is Associate Professor of Finance at Saint Joseph’s University. He obtained his PhD from Baruch College, The City University of New York. He also holds FRM (Financial Risk Manager) designation. He teaches both at the undergraduate and graduate programs at Erivan K. Haub School of Business. His research interests include capital markets and international financial markets. He has published several papers in refereed academic journals.

 

References

Bertrand, M., and Schoar, A., (2003) Managing with Style: The Effects of Managers on Firm Policies, The Quarterly Journal of Economics, 118 (4): 1169-1208.

Bond, T. G., and Fox, C. M., (2007) Applying the Rasch Model: Fundamental Measurement in the Human Sciences. New Jersey: Lawrence Erlbaum Associates, Inc., Publishers.

Goodman, M., (2009) Pharmaceutical Industry Financial Performance, Nature Review Drug Discovery, 8(12): 927-28.

Lewellen, J., (2004) Predicting Returns with Financial Ratios. Journal of Financial Economics. 74: 209–235.

Tickell, S., (2013) PharmaFutures: Pathways to Value: Pharma in a Changing World. Oxford, UK: Meteos Ltd.

Rasch, G., (1960) Probabilistic Models for Some Intelligence and Attainment Tests Copenhagen: Danmarks Paedagogiske Institut.

Schellhorn, C., and Sharma, R., (2013) Using the Rasch Model to Rank Firms by Managerial Ability. Managerial Finance, 39 (3): 306-319.

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Published

2016-05-05

Issue

Vol. 22 No. 1 (2016)

Section

Article