The Impact of Liquidity on Firms’ Performance: Empirical Investigation from Indian Pharmaceutical Companies

Abstract

The main aim of this paper is to investigate the impact of liquidity on the profitability of pharmaceutical companies listed on Bombay Stock Exchange (BSE). Data are extracted from ProwessIQ database. The analysis is done using a balanced panel data of 82 pharmaceutical companies for the period of 10 years from 2008 to 2017. Findings reveal that current liquidity ratio and quick ratio have a positive and significant impact on the profitability of pharmaceutical companies measured by return on assets, while control variables leverage, firms’ size, and age have a negative impact on the profitability of pharmaceutical companies. The study used recent literature to explore the gap in the existing literature. This study will be useful for regulators, finance managers and other people concerned about liquidity in order to understand its importance. This study is considered one of the pioneering studies that examines the impact of liquidity in the financial performance of Indian pharmaceutical companies. It is considered a battery for further research in this area.