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Empirical Analysis of Operating Efficiency and Firm Value: A Study of Fast Moving Consumer Goods and Pharmaceutical Sector in India

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  • Pritpal Singh Bhullar

    (Department of Humanities and Management Studies, Giani Zail Singh Campus College of Engineering and Technology (Constituent College of Maharaja Ranjit Singh Punjab Technical University, Bathinda), Punjab, India.)

Abstract

The present paper investigates the impact of operating efficiency on firm valuation for two economic sectors fast moving consumer goods (FMCG) and pharmaceutical sectors in India. The study considers 30 Indian firms from the period of 2005 to 2015. To examine the effect, six financial ratios are considered as proxy for operating efficiency and enterprise value (EV) as proxy for firm value. We employ panel data analysis to explore the relationship of dependent and independent variable. The results report that fixed asset turnover ratio (FATO) and net profit margin indicates negative relation with EV in pharmaceutical sector and EV/Sales and FATO confirms negative relation with EV for FMCG sector. The empirical results will act as guidelines for the valuation analysts for implication of new valuation variables by replacing conventional variables. Moreover, the study implies that value creation is more significant to current performance as compared to past performance.

Suggested Citation

  • Pritpal Singh Bhullar, 2017. "Empirical Analysis of Operating Efficiency and Firm Value: A Study of Fast Moving Consumer Goods and Pharmaceutical Sector in India," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 671-675.
    • Handle: RePEc:eco:journ1:2017-03-87
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    References listed on IDEAS

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    More about this item

    Keywords

    Operating Efficiency; Panel Data; Enterprise Value; Fast Moving Consumer Goods and Pharmaceutical Sector;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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