A Multi-Criteria Decision-Making Framework for Financing Selection in Pharmaceutical Companies: Evidence from Firms Listed on the Tehran Stock Exchange
This study develops an integrated multi-criteria decision-making framework using fuzzy Delphi, AHP, and TOPSIS methods to identify key financing criteria and prioritize alternatives for pharmaceutical companies listed on the Tehran Stock Exchange, revealing that financing efficiency is the most influential factor and company formation is the optimal financing strategy.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
Making a new medicine is a gamble of time and money that few other industries face. Before a drug can reach a pharmacy shelf, a company must pour vast sums into research, navigate years of strict government testing, and hope the final product works as intended. This process creates a unique financial puzzle: how does a company pay for a project that might not yield a profit for a decade, or might fail entirely? The answer lies in choosing the right way to get the money. This choice is not just about finding the cheapest loan; it is a complex strategic decision involving risk, control, and the ability to keep innovating over the long haul. When a pharmaceutical firm picks the wrong funding source, it can lose the flexibility needed to finish its research or even go bankrupt before a cure is found.
A recent study focusing on pharmaceutical companies listed on the Tehran Stock Exchange set out to solve this puzzle by mapping out exactly how these firms should choose their funding. The researchers gathered a group of twenty experts, including financial specialists, industry managers, and academics, to build a decision-making guide. Instead of relying on a single formula or a simple list of pros and cons, they used a structured approach that combined expert opinion with a step-by-step ranking system. First, they asked the experts to agree on what factors truly matter when picking a funding source. They filtered out less important ideas until six key criteria remained: how efficiently the money is used, the cost of borrowing, how sustainable the funding is over time, whether the method works with the company's daily operations, how fairly resources are shared, and how transparent the process is.
Once the experts agreed on these six pillars, the researchers asked them to weigh the importance of each one. The results revealed a clear hierarchy of priorities. The most critical factor was not the price of the money, but rather how efficiently the financing method supports the company's goals, which the experts rated as the top concern. The actual cost of the funds came in second. Sustainability and the ability to fit the funding into daily operations followed, while fairness and transparency, though still necessary, were considered less decisive than the practical mechanics of getting the job done. This finding suggests that for these companies, the value of a funding source is measured by how well it fuels innovation and keeps the business running, rather than just by how low the interest rate is.
With the criteria ranked, the team tested various ways pharmaceutical companies can raise money to see which option performed best against these six standards. The study evaluated options ranging from foreign investment and stock market participation to forming new companies and taking out bank loans. The analysis showed that forming a new company was the strongest option, scoring highest because it offered the best balance of control, flexibility, and strategic alignment. Receiving financial facilities, such as traditional bank loans, came in a close second, proving that conventional debt remains a vital tool for these firms. Issuing participation bonds, which are a type of investment certificate, ranked third.
The study also highlighted what does not work as well in this specific context. Attracting foreign investment received the lowest ranking, a result the researchers attributed to the specific regulatory and economic hurdles that make international capital difficult to access for these firms. Similarly, simply setting up a project study or relying on the stock market did not score as highly as the more direct methods of company formation or bank financing. The researchers concluded that while cost is important, it is not the only driver; the most successful funding strategy is one that aligns with the long-term, uncertain nature of drug development. By using this structured framework, managers can move beyond guessing and select funding sources that are not only affordable but also capable of sustaining the years of work required to bring a new medicine to the world.
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