Health Care Reform and the Stock Market: Economic Impact, Growth Opportunity and Private Sector Investors

Gang Nathan Dong

Abstract


Objective: To study the potential economic impact of the health care reform (PPACA) on business in the health care sector.

Data Sources: Financial statement data from Compustat and stock return data from CRSP.

Study Design: Firms are categorized into 12 industries including medical clinics, drug distributors, hospitals, insurers, medical product manufacturers, nursing homes, pharmaceuticals, etc. To study the PPACA’s economic impact on the health care sector, we use the event study method and regression analysis to examine the excess stock returns caused by the Congress’s passage of the PPACA in 2010 and the Supreme Court’s upholding of the Act in 2012.

Findings: The market appears to support the Act in general and reacts positively to the health service business including hospitals, medical clinics, and specialty outpatient facilities.

Conclusions

For regulators who want to explore how to reduce the costs of public funding to health care, or for private investors who are considering entering the health care market, this result helps identify growth opportunities within the sector and the levels of interest that majority of investors have towards them.


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