VALUE CREATION IN INDIAN PHARMACEUTICAL INDUSTRY: A REGRESSION ANALYSIS

Abstract

Maximizing shareholders wealth is becoming the new corporate standard in India. The
corporates, which gave the lowest preference to the shareholders’ inquisitiveness, are
now bestowing the utmost inclination to it. Shareholders’ wealth is measured in terms of
the returns they receive on their investment. Traditionally, the yardsticks used to measure
the efficiency and profitability of a business organization were accounting based
measures like ROI, ROE, ROCE, EPS, RONW and financial ratios. But, now a days
value added measures have emerged as a replacement of the traditional accounting based
measures. The reason behind this is that the financial performance of a business
organization is measured from the shareholders’ value point of view. Value added
represents the wealth created by an enterprise during a specified period. No companies
can survive and grow, if it fails to generate value to its shareholders. Hence, value added
is a basic measure which is used for measuring the financial performance of an enterprise.
Most recently, creating value for firm’s shareholders- widely accepted objective for the
firm has been incorporated into the strategic management literature through value based
planning. By keeping this in mind, this study is an attempt to analyze the value creation
in Indian Pharmaceutical Industry from 1997-98 to 2006-07 by using regression analysis.