Abstract

Effective working capital management is a key driver in shaping a company's financial performance and profitability. It focuses on managing short-term assets and liabilities to ensure that a business has enough cash flow to cover its immediate commitments and operational demands. The purpose of this study is to assess the relationship between working capital management and the profitability of pharmaceutical companies in India. For the empirical analysis, data from 20 pharmaceutical companies listed in Nifty Pharma were considered spanning a decade i.e, 2014-15 to 2023-24. The results are estimated using a multivariate panel data regression technique. The analysis was conducted using pooled ordinary least squares (POLS). To validate the results of the POLS approach, a post-estimation Breusch-Pagan Lagrange Multiplier test was employed, which ultimately led to the rejection of the null hypothesis. Additionally, the research analyzed the suitability of the fixed effects model versus the random effects model through the Hausman test. The study indicates that the random effects model is better suited than the fixed effects model.