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

Yameen, Mohammad; Farhan, Najib H.S.; Tabash, Mosab I.

doi:10.36941/ajis-2019-0019

Cited by 21 publications

(22 citation statements)

References 16 publications

(19 reference statements)

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“…Current ratio is taken as a proxy for liquidity from the work of (Nanda & Panda, 2018;Jelena et al, 2018). Liquidity is found to be positively related to profitability (Goddard et al, 2005;Nanda & Panda, 2018;Yameen et al, 2019) as well as none or negatively related to profitability (Zainudin et al, 2018).…”

Section: Independent Variablesmentioning

confidence: 98%

The Nexus Between Firm Specific Factors, Macroeconomic Factors and Firm Performance of Textile Sector of Bangladesh

2021

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The purpose of this study is to identify the determinant factors of the profitability of textile sector of Bangladesh. To achieve this, a sample of 31 textile companies for the period of 2011 to 2019 is used. Two dependent variables- return on assets ROA (accounting measure) and Tobin’s Q (market measure) are tested using both fixed effect model and Panel corrected standard error (PCSE) model. As the PCSE regression robustly suited the dataset, this is used to explain the impact of both firm specific factors and macro-economic factors on the performance of textile firms listed in Dhaka Stock Exchange. The determinants of profitability differ depending on which measures of profitability we have taken as proxy. When ROA is taken, age, debt to equity, debt to asset, growth, asset turnover, cost effectiveness (EATC) and export growth are found significant. Among them, debt to equity, asset turnover, cost effectiveness and export growth conforms to the expected positive sign. In terms of Tobin’s Q, age, size, debt to equity, growth, cost effectiveness (EATC), board size and export growth are found having significant impact on firm performance where age, EATC, board size, and export growth conforms to the expected positive sign.

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Section: Independent Variablesmentioning

confidence: 98%

The Nexus Between Firm Specific Factors, Macroeconomic Factors and Firm Performance of Textile Sector of Bangladesh

2021

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“…Table 3 shows the selected nancial ratios and their formula based on (Caracota et al, 2010). Liquidity refers to a rm's ability to repay its short-term debt (Yameen et al, 2019). Next, when dealing with the banking sector, solvency is used to assess a rm's viability (Zorn et al, 2018).…”

Section: Data Settingmentioning

confidence: 99%

Determining the Credit Score and Credit Rating of Firms using the Combination of KMV-Merton Model and Financial Ratios

Yusof

Alias

Kassim

et al. 2021

sci. technol. indones.

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Credit risk management has become a must in this era due to the increase in the number of businesses defaulting. Building upon the legacy of Kealhofer, McQuown, and Vasicek (KMV), a mathematical model is introduced based on Merton model called KMV-Merton model to predict the credit risk of firms. The KMV-Merton model is commonly used in previous default studies but is said to be lacking in necessary detail. Hence, this study aims to combine the KMV-Merton model with the financial ratios to determine the firms’ credit scores and ratings. Based on the sample data of four firms, the KMV-Merton model is used to estimate the default probabilities. The data is also used to estimate the firms’ liquidity, solvency, indebtedness, return on asset (ROA), and interest coverage. According to the weightages established in this analysis, scores were assigned based on those estimates to calculate the total credit score. The firms were then given a rating based on their respective credit score. The credit ratings are compared to the real credit ratings rated by Malaysian Rating Corporation Berhad (MARC). According to the comparison, three of the four companies have credit scores that are comparable to MARC’s. Two A-rated firms and one D-rated firm have the same ratings. The other receives a C instead of a B. This shows that the credit scoring technique used can grade the low and the high credit risk firms, but not strictly for a firm with a medium level of credit risk. Although research on credit scoring have been done previously, the combination of KMV-Merton model and financial ratios in one credit scoring model based on the calculated weightages gives new branch to the current studies. In practice, this study aids risk managers, bankers, and investors in making wise decisions through a smooth and persuasive process of monitoring firms’ credit risk.

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“…Indian pharmaceutical companies' financial stability has been decreasing while the industry is increasing its market share in India (Bhunia, 2010). The liquidity ratios have a positive and significant impact on the profitability of the Indian pharmaceutical industry (Yameen et al, 2019). The inefficient managerial efficiency and low production level are the responsible factors for the unexpected performance of pharmaceutical industry of India while marketing and advertisement factors also affect the pharmaceuticals industry and operational cost can be lowered by reducing capital cost, salary and wages, and marketing cost .…”

Section: Literature Reviewmentioning

confidence: 99%

Financial Performance and Size Determinants: Growth Trend and Similarity Analysis of Indian Pharmaceutical Industry

Anis

2020

HSSR

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Purpose of the study: The purpose of the present study is to find out the growth trend, Similarity in financial performance, and co-movement, sensitivity, or governance of firms' size determinants on the profitability of Indian pharmaceutical companies. Methodology: The analysis is based on ratio analysis, while Chain based index numbers are calculated to get the trend of financial performance and size determinants. Statistical tools, ANOVA, and coefficient of variations (CV) used to get the Similarity of profitability and Liquidity while Chain based index numbers are the base to calculate the movements of variables and Similarity. Main Findings: The trend of profit measures growth governs the growth trend of the size measurements of the Indian pharmaceutical companies. The pharmaceuticals companies are utilizing their funds equally and total resources in the pharmaceuticals companies govern the operational profitability (EBIT), short term, and long term liquidity while it does not affect the short-term movement symmetry of the profitability and size determinants. There is no significant difference in short term movement or sensitivity of profitability and firms' size determinants of Indian pharmaceutical companies. Applications of this study: The finding of the study implies that the funds invested in total resources enhance the profits while equal utilization of resources by selected pharmaceutical companies. So, this study recommends enhancing the investment in total resources to get increased amounts of profits. Novelty/Originality of this study: This study is one of the few studies that measure the trend of Similarity and sensitivity of financial performance and size determinants of Indian pharmaceutical companies. In this process, it performs the trend, movement sensitivity, and financial performance similarity analysis using the index numbers of financial variables of Indian pharmaceutical companies.

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

Cited by 21 publications

References 16 publications

The Nexus Between Firm Specific Factors, Macroeconomic Factors and Firm Performance of Textile Sector of Bangladesh

The Nexus Between Firm Specific Factors, Macroeconomic Factors and Firm Performance of Textile Sector of Bangladesh

Determining the Credit Score and Credit Rating of Firms using the Combination of KMV-Merton Model and Financial Ratios

Financial Performance and Size Determinants: Growth Trend and Similarity Analysis of Indian Pharmaceutical Industry

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