Deciphering the relationship between Corporate Governance and Corporate Financial Performance in Indian Pharmaceutical Sector

Corporate Governance issues have gained momentum over the years tremendously. The accounting frauds and irregularities of Enron, Satyam etc. stimulated the regulatory authorities to reconsider their policies and monitoring process. This study intends to highlight the disclosure and compliance of corporate governance practicesby four Indian pharmaceutical sector companies namely Cipla Ltd., Lupin Ltd., Dr. Reddy's Laboratories and Sun pharmaceuticals Ltd.listed at Bombay Stock Exchange (BSE) for 3 years i.e. from FY 2018-19 to 2020-21. Also, to establish a relationship between corporate governance attributes namely Board of Directors and Return on capital employed as a corporate financial performance indicator. To ascertain the level of disclosure, a checklist has been prepared in line with statutory obligatory requirements prescribed by Companies Act, 2013 and SEBI (LODR) regulations, 2015 and items disclosed in annual reports also have been accounted for. The hypothesis framed has been tested using Spearman's rank correlation coefficients and the study concludes that no significant relationship has been observed in corporate governance and corporate financial performance in the entire study period. However, statutory obligations have been complied with, satisfactorily.Further, the study suggests that Disclosure pattern of corporate governance attributes such as Board skill matrix require improvement Lupin Ltd, Dr. Reddy's Laboratories and Sun pharmaceuticals Ltd as should have been disclosed by the company that individual who is being appointed in BOD possess the requisite knowledge and would serve in the best interest of investors and company.