A Study of Shareholder Value Creation of Selected Indian Pharmaceutical Companies

Maximizing shareholders wealth is becoming the new corporate standard in India. Shareholders’ wealth is measured
in terms of the returns they receive on their investment. Traditionally, the yardsticks used to measure the efficiency and
profitability of a business organization were accounting based measures like ROI, ROE, ROCE, EPS, RONW and financial
ratios. But, now a day’s value added measures have emerged as a replacement of the traditional accounting based measures.
The reason behind this is that the financial performance of a business organization is measured from the shareholders’ value
point of view. Value added represents the wealth created by an enterprise during a specified period. No companies can survive
and grow, if it fails to generate value to its existing and potential shareholders. Hence, value added is a basic measure which is
used for measuring the financial performance of an enterprise. By keeping this in mind, this study is an attempt to analyze the
value creation in Indian Pharmaceutical Industry from 2005 to 2014 by using regression analysis.