Board of Directors Composition, Cash Conversion Cycle and Firms Performance: An Empirical Evidence from India

Abstract

This paper examines the influence of cash conversion cycle (CCC) on the performance of Indian pharmaceutical companies. Furthermore, it aims to find out whether corporate governance measured by board of directors' composition moderates the relationship between CCC and firms' performance. The analysis of this paper is based on a panel dataset of 82 companies over the period from 2008 to 2017. The study uses generalised method of moment (GMM) model for estimating the results. Return on assets (ROA), net operating margin (NOM), and Tobin Q (TQ) are used as proxies for firms' performance, while CCC is used as an independent variable. Leverage and firms' size are used as control variables. The study revealed that CCC negatively affects the profitability of Indian pharmaceutical companies. Furthermore, it is also revealed that board of directors' composition moderates the association between CCC and firms' profitability. The study seeks to contribute to the existing literature by evaluating CCC on the performance of pharmaceutical companies in a different context; India.