Correspondence: Leanne C. McGrath, University of South Carolina Aiken, School of Business, 471 University Parkway, Aiken SC 29801, USA. Tel: +1 803 641 3235; Fax: +1 803 641 3445; e-mail: leannem@usca.edu

¹has BS and PhD degrees in Marketing from Florida State University. He is Associate Professor of Marketing and holds the Walter F. O'Connell Palmetto Professorship for Director of O'Connell Center for Excellence and Technology at the Universityof South Carolina Aiken.

²has BS and MS degrees in Pharmacy, and MBA and PhD degrees in Business Administration, all from the University of South Carolina. She is Professor of Management and holds the John M. Olin Palmetto Professorship in Entrepreneurial Development at the University of South Carolina Aiken.

³has a BS in Accounting from Shippensburg University, an MBA from Drexel University and PhD degree in Finance from Kent State University. He is Assistant Professor of Finance at the University of South Carolina Aiken.

Received 29 August 2007; Revised 29 August 2007.

Abstract

The pharmaceutical industry expends billions of dollars yearly on intangibles, all in the pursuit of greater profits. Because of this, investors are naturally interested in whether intangible assets and expenditures truly create shareholder value. In this paper four intangibles, namely advertising, research and development (R&D), goodwill and other intangibles, are investigated to establish their effects on market-adjusted holding period returns (HPR), a measure of how much excess return an investor would have achieved over the market return during some specified time-frame. Results seem to indicate that of these variables, advertising does in fact seem to have a significant and positive impact on HPR. Concerns about the limitations of the study and suggestions for future research are also discussed.