Finance and Accounting Banking Regulation and Risk
An analysis of GSK and the pharma industry
Reprisk’s 2013 report cited Glaxo Smith Klein (GSK) amongst the world’s top 10 ‘Most Controversial Companies’ ( http://www.reprisk.com/marketing/wp-content/uploads/2014/04/140416-RepRisk-MCC-Report.pdf ). Your assignment is to research and report on the global pharmaceuticals industry and particularly GSK, by answering the following questions:
1. Trace GSK’s share price over the last two years and compare it with the performance of its rivals and the stock market in general. Is there any evidence that the supposed scandals have affected the way the market values the company? Explain, with reference to the Efficient Market Hypothesis.
2. Some people argue that it’s the responsibility of politicians to say what is legal and what is not and that the role of managers is to push the boundaries as far as they can in order to maximise shareholder value. Other people would argue that companies have a duty to all stakeholders and that demonstrating a strong sense of social responsibility is in the interests of all big corporations. Using evidence from your research on GSK’s actions, which of these two apparently contradictory statements best sums up GSK’s policy and approach? Explain.
3. Review GSK’s dividend policy over the last four quarters. Are the share price movements when the share goes ‘ex dividend’ what you would have expected? Explain. Do you think GSK is using the most effective policy for distributing surplus cash to shareholders? Explain.
4. Recently Pfizer made a bid for AstraZeneca. In your view, why did the bid fail? Did the press play an important role in ensuring the failure of the bid? Was this the best result for society? Explain your answer carefully.
Notes and hints.
1. This is an individual assignment and should be no more than 1,500 words excluding appendices.
2. Each question will be allocated 20 marks. An additional 20 marks will be awarded for breadth and quality of research and referencing (10 marks) and for overall quality of presentation and argument (10 marks). As usual, most of the marks will be awarded for the quality of your arguments and explanations: there are not necessarily any ‘right’ or ‘wrong’ answers. Try to consider and report both sides of the argument, providing supporting evidence, and come to a clear conclusion of your own which follows logically from what you’ve presented.