Impact of R&D activities on the financial performance: empirical evidence from Indian pharmaceutical companies

Purpose This paper aims to study 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 by conceptualizing R&D’s impact and financial performance framework (RDiFPF). Design/methodology/approach Strongly balanced panel data set was used for the period of 1999–2020 on the basis of secondary data subscribed from a reputable Capitalline, a corporate database as well as individual company-wise annual report extract for cross-validation. Findings The paper presents a novel conceptualized framework called RDiFPF with the help of financial performance related variables: sales turnover, return on assets, return on equity and market capitalization, where R&D impacts in a significant manner on the financial performance of the NSE-listed Indian pharmaceutical companies. The paper finally establishes a link between R&D activities and financial performance with respect to the Indian pharmaceutical companies listed with the NSE. Research limitations/implications The suggested framework opens new dimension of research with respect to R&D, innovative practices in the pharmaceutical business and financial performance. The research can also be used in teaching and may be beneficial for framing public policy. Though the study has been carried out in Indian context, it might have implications in the emerging economies. Practical implications To achieve financial returns, pharmaceutical companies need to adopt appropriate endeavour to invest substantial amount on R&D to bring innovation in the pharmaceutical business. Social implications A better allocation of R&D expenditure has the potential for bringing new medicine, which can cure unknown diseases and impact on the lives of the patient fraternities. Originality/value The contributions of the paper are twofold: on the one hand, the author proposes a framework where emphasis has been provided on the R&D investment in the pharmaceutical business and, on the other hand, significant financial performance has been shown which motivates every R&D-centric pharmaceutical companies. Notably, the novel RDiFPF framework, which has been proposed in this study, may ignite and inspire the pharmaceutical business leaders as well as entrepreneurs to take R&D and innovation in pharmaceutical business for impacting human lives as well as to enjoy significant financial returns by providing health-care solution for treating novel diseases and disorders.

Density Forecast of Financial Returns Using Decomposition and Maximum Entropy

We consider a multiplicative decomposition of the financial returns to improve the density forecasts of financial returns. The multiplicative decomposition is based on the identity that financial return is the product of its absolute value and its sign. Advantages of modeling the two components are discussed. To reduce the effect of the estimation error due to the multiplicative decomposition in estimation of the density forecast model, we impose a moment constraint that the conditional mean forecast is set to match with the sample mean. Imposing such a moment constraint operates a shrinkage and tilts the density forecast of the decomposition model to produce the improved maximum entropy density forecast. An empirical application to forecasting density of the daily stock returns demonstrates the benefits of using the decomposition and imposing the moment constraint to obtain the improved density forecast. We evaluate the density forecast by comparing the logarithmic score (LS), the quantile score (QS), and the continuous ranked probability score (CRPS). We contribute to the literature on the density forecast and the decomposition models by showing that the density forecast of the decomposition model can be improved by imposing a sensible constraint in the maximum entropy framework.

Impact of Corporate Governance on Financial Returns of Indian Listed Companies

Purpose- In this paper, we have evaluated the relationship of corporate governance with companies’ financial returns using return on assets (ROA) and return on capital employed (ROCE) as proxies. For this purpose, companies listed in Nifty-50 are considered as a sample. Design/Methodology- The present study is conducted on the NIFTY-50 Index with a final sample of 35 companies after excluding banking companies, financial services companies, and companies that did not have the required data in the sample period. Data has been collected for ten years from 2009-10 to 2018-19, and they are analyzed with the help of software packages such as SPSS and Stata. Findings- The results showed that firms’ financial return measures (ROA and ROCE) were significantly affected by governance measures, board committees, and CEO duality. Board size, board meetings, and board independence did show positive relation, but it was not significant. Our analysis observed that corporate governance significantly affected the financial return of Indian listed companies. Practical Implications- Our research work indicated the importance of corporate governance in generating financial returns for Indian listed companies. CEO duality is found to be increasing the ROCE of listed companies in India, and therefore investors should choose such companies where the CEO plays a dual role in the board. Also, policymakers should take into consideration the dual role of CEOs while making changes in company regulations.

Are sustainability-oriented investors different? Evidence from equity crowdfunding

In this article, we examine how investor motives affect investment behavior in equity crowdfunding. In particular, we compare the investment behavior of sustainability-oriented with ordinary crowd investors on six leading equity crowdfunding platforms in Austria and Germany and investigate whether they suffer from a default shock that was recently identified by Dorfleitner et al. (2019). In general, we find evidence of a default shock in equity crowdfunding that occurs immediately after the event or if investors experience more than two insolvencies. Moreover, we find that sustainability-oriented investors pledge larger amounts of money and invest in more campaigns than ordinary crowd investors. The results also suggest that sustainability-oriented crowd investors care about non-financial returns, as they react more sensitively after experiencing a default in their equity crowdfunding portfolios, which indicates that they suffer beyond the pure financial loss. These findings contribute to recent literature on equity crowdfunding, socially responsible investing, and how individual investment motives and personal experiences affect investment decisions.

Equity Investments, Bond Investments and Financial Performance of Collective Investment Schemes in Kenya

The collective investment schemes in Kenya have witnessed increased volatility in their earnings, resulting in irregular growth in the industry. This necessitates the need to understand the factors contributing to poor financial returns from collective investment schemes. Hence this study sought to investigate the effect of equity investments and bond investments on Kenyan CIS’s performance. The specific objectives were: To assess the effect of equity investments, bond investments on financial performance of collective investment schemes in Kenya. The study was anchored on: modern portfolio theory and the efficient market hypothesis. The positivism philosophy was applied, with the firms adopting an explanatory research design. The target population was 17 Collective Investment Schemes registered by the Capital Markets Authority and were operational in the period 2010 to 2018. Secondary data was sought from the Capital Markets Authority Annual reports and from the respective websites of the CIS’. Data was analyzed using descriptive statistics, correlational analysis and panel regression analysis. Hypotheses were tested at a significance level of 0.05. Findings indicate that equity investment, bond investments have an insignificant effect on CIS’ return on assets. Further, equity investments had a positive and significant effect on liquidity whereas bond investments had an insignificant effect on liquidity. The study recommends that CISs actively revise their equity investments and bond investments to stimulate financial returns.