Assets Management of the Indian Pharma Sector in the Changing Socio-Cultural and Business Environment of Post-Liberalization Era: A Comparative Study on Select Multinational and Domestic Companies

Assets Management of the Indian Pharma Sector in the Changing Socio-Cultural and Business Environment of Post-Liberalization Era: A Comparative Study on Select Multinational and Domestic Companies

Kaushik Chakraborty (Kazi Nazrul University, India)
DOI: 10.4018/978-1-4666-9908-3.ch003
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Abstract

Efficiency of assets management is an absolutely unavoidable issue in accomplishing the wealth maximization objective of business. In India, the changing scenario in the front of demographic, social and cultural made a prominent impact on the growth of pharmaceutical industry. In fact, during the last two decades the changing socio-cultural and business environment of India witnessed a rapid change in various managerial as well as financial applications of the Indian pharma sector. Assets management is no doubt a vital part of the overall strategy for achieving financial objectives of any industry. In this backdrop, the present study empirically investigates the relationship between the efficiency of assets management and profitability of the Indian pharmaceutical industry during the period 1998-99 to 2012-13 and also examines whether its findings conform to the theoretical arguments. Besides this, the paper also tries to make a comparison, in respect of the efficiency of assets management, between multinational and domestic companies in the Indian pharmaceutical industry during the same period to know whether changing socio-cultural and business environment gives an age to domestic companies in respect of assets management or not. The sample size of the study consists of ten pharmaceutical companies by taking five multinational and five domestic companies from the Indian pharmaceutical industry. The issues analyzed in this study have been tackled using relevant statistical tools and techniques.
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2. Review Of Existing Literature

Before entering into the empirical work, a quick look through the existing literature on the analysis of efficiency of assets management seems desirable. A considerable number of empirical studies on assets management have been carried out by different researchers in India during the last four decades. But a very few studies relating to the assessment of efficiency of assets management have been conducted in India during the post-liberalisation era. The following paragraphs provide very brief explanation of some significant studies so far carried out in India on the issue.

Khatick and Singh (2003) in their work on Eircher Ltd. during the period 1994-95 to 1998-99 showed that there was a positive impact of inventory management of the company towards improving the efficiency of its liquidity management.

Ghosh and Maji (2004) conducted a study on the evaluation of the efficiency of the working capital management of Indian cement industry during the period 1992-93 to 2001-02. This study identified no consistency regarding betterment of efficiency in working capital management of the selected cement companies during the study period.

Sur et al. (2007), made a comparative study of the efficiency of asset management of Colgate-Palmolive (India) Ltd. in the pre-liberalisation period (1980-81 to 1991-92) and in the post-liberalisation era (1992-93 to 2003-04). The study observed a significant negative influence of the company’s inventory management on its profitability during the post-liberalisation period.

The study conducted by Azhagaiah and Gejalakshmi (2007) for examining the efficiency of working capital management of thirty selected companies in Indian textile industry during the period 1995-96 to 2005-06 concluded that the efficiency of managing current assets of the companies under study was one of the contributory factors towards improving their profitability.

Sur and Chakraborty (2010) studied the efficiency of working capital management of fifty companies (from ten industries which have been selected from manufacturing sector) during the period 1997-98 to 2008-09. The study made an analysis of relative efficiency-profitability status of the selected ten industries during the study period and observed that the food producing industry maintained a nice blend of efficiency of investment in working capital management and overall profitability during the period under study.

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