Is There Any Impact of R&D on Financial Performance? Evidence from Indian Pharmaceutical Companies

Abstract

This intention of this research article is to analyze the impact of research and development (R&D) activities on the financial performance of Indian pharmaceutical companies listed with the national stock exchange (NSE) of India. Strongly balanced panel dataset of 40 sample pharmaceutical companies for the period of 1998-2019 (21 years) has been used. In the empirical analysis section: Descriptive Statistics, Bivariate Correlation Matrix, Variation Inflation Factor, Skewness/Kurtosis Tests, Breusch-Godfrey LM Test, Heteroskedasticity Test, Levin-Lin-Chu Unit-Root Test, Generalized Method of Moments (GMM) and panel regression models (Fixed Effect Model and Random Effect Model) followed by Hausman Test have been discussed. For data analysis purpose, STATA (version 12.0) software has been used. To analyze the impact of R&D on financial performance, four different financial performance related variables: Sales Turnover, Return on Assets, Return on Equity, and Market Capitalization have been used as dependent variables and these variables have been placed one after another in four different empirical models which have been estimated in this study. The study has revealed that there is a significant positive impact of R&D activities on the financial performance of Indian pharmaceutical companies listed with NSE during the study period.