Analyzing Business Risk through Ginni's Coefficient of Concentration: A Comparative Study of Select Domestic and Multinational Companies in Indian Pharmaceutical Industry

Abstract

The paradigm shift of the Indian economy to a market-dominated open economic system in 1991 from a state-dominated subsidized financial system consequent upon the world wide wave in favour of globalization and liberalization gaining momentum in the last quarter of the twentieth century and signing of the Trade Related Intellectual Property Rights System (TRIPS) agreement in 1995 are considered as watershed events for the Indian industries in the recent time. Pharmaceutical industry, one of the promising industries of the country, is not a silent spectator to witness these path breaking events.With the spectacular changes in the business milieu, the earning trends, the cost behavior pattern, capital productivity and liquidity policies in the Indian pharmaceutical industry have also changed radically. Consequently, the pattern of business risk associated with the companies in the Indian pharmaceutical industry has witnessed notable changes. A sizeable number of studies on the analysis of business risk in Indian corporate sector have been made during the last few decades. Study on the same issue, though few in numbers, have also been carried out emphasizing the study in the context of the post-liberalization eon. However, adequate attention has not yet been paid to the Indian pharmaceutical sector in respect of analyzing its business risk in the academic studies in the perspective of post-liberalization era. In this backdrop, the present study seeks to analyze the business risk in the Indian pharmaceutical industry during the period 2001-02 to 2010-11 and also to examine whether its findings are at par with the theoretical arguments as forwarded by the eminent theorists and researchers. The sample size of the study consists of twenty five companies which have been selected from the top thirty pharmaceutical companies in India (based on the sum of total income and total asset) following purposive sampling procedure. While measuring the business risk and its company specific components associated with the selected companies, Ginni's Coefficient of Concentration has been used.