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On business short-termism: the case of CVS’s discontinuing tobacco sales

Author

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  • Chase Gooding
  • E. Frank Stephenson

Abstract

Purpose - The purpose of this paper is to examine the effect of CVS’s decision to stop tobacco sales on the company’s share price. Design/methodology/approach - The paper uses event study methodology to examine the same day effect of CVS’s announcement and the one-year later effect of CVS’s announcement. Competing pharmacy retail chains’ stock performance is included for comparison purposes. Findings - CVS’s shares fell by about one percentage point on the day of the company’s announcement while competitors’ share prices increased. A year later, however, CVS’s share price had increased by about twice as much as competitors’ share prices. Originality/value - The finding that a company can make a decision that harms its short-run share price in exchange for a long-run share appreciation suggests that short-termism may not be as significant a concern as some critics of corporate management suggest.

Suggested Citation

  • Chase Gooding & E. Frank Stephenson, 2018. "On business short-termism: the case of CVS’s discontinuing tobacco sales," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 7(2), pages 161-165, May.
    • Handle: RePEc:eme:jepppp:jepp-d-18-00001
    DOI: 10.1108/JEPP-D-18-00001
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    Keywords

    Event study; Short-termism; CVS;
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