Impact of Corporate Governance Disclosure Practices on Corporate Profitability: A Case Study of Pharmacy Sector Companies

Corporate Governance takes place at top level in any company.Although Corporate Governance is seen as protecting the interest of the stakeholders of the company but does Corporate Governance impact on profitability of any company? This study tries to find the answer for the same. With this objective, the study has been taken three Pharmacy Sector companies which are included in BSE Top 100 viz., Dr.Reddy's Lab.Ltd., Lupin Ltd.and SPIL. The study covers three financial years from 2014-15 to 2016-17 for the measurement of the level of Corporate Governance Performance and Corporate Profitability of the SampledCompanies. Corporate Governance Performance has been measured on the basis of Corporate Governance Index which has eighteen parameters issued by SEBI in SEBI (LODR) Regulations, 2015 and Companies Act, 2013. While Profitability of Pharma Sector Companies measured by ROCE. To determine the impact of Corporate Governance on Profitability,the study used Wilcoxon Signed Rank test and Spearman's Rank Correlation Test as statistical tools. After the analysis of various data and statistical tools,it has been found that the Corporate Governance Performance Scores of Pharmacy Sector Companies have very good Corporate Governance Performance but Dr. Reddy's Lab. Ltd. has highest Corporate Governance Performance Score among all three companies.The ROCE rates of Pharmacy Sector Companies ranges between 21% to 37%, 17% to 21% and 12% to 22% in 2014-15, 2015-16 and 2016-17 respectively which shows the rate of ROCE of Pharmacy Sector Companies are declining from year to year. The study found that there is no perfect correlation between Corporate Governance Performance and Corporate Profitability of the company for all three Pharmacy Sector Companies at 5% level of significance inall three financial years.