Impact Of Intangible Assets On Profitability And Capital Structure Of Listed It And Pharma Companies In India

Abstract

there are many types of intangible assets / resources, either newlineinternally generated or acquired as a part of acquisition or takeover of other firms in Indian IT newlineand Pharmaceutical sectors. This research tries to understand and investigates how efficiently newlinethese intangible assets are being leveraged and what s empirical impact these intangible assets newline(Goodwill, technical-scientific know how, Intellectual property rights, Copyrights, design, newlineproduct know-how, special processes, softwares / programmes, brand, patents, client and newlinevendor relationship, client contracts, licensing agreements etc.,) have on the financial newlineperformance of the organization particularly operating profit and the profit after tax of the newlineorganizations. Additionally this research also empirically analyses how these intangible assets newline(present in balance sheet) impact the capital structure of the firms and what s the impact of newlineequity part of capital structure on the profitability (Operating profit and Profit after Tax) of the newline newlineIMPACT OF INTANGIBLE ASSETS ON PROFITABILITY AND CAPITAL STRUCTURE OF LISTED IT AND newlinePHARMA COMPANIES IN INDIA By Vijay Mallappa Shegunshi newline newline10 newline newlinefirms in these two sectors. Top 20 BSE stock exchange listed companies by market newlinecapitalization each from both IT and pharmaceutical sectors have been selected for this research newlineand the data for 10 years from 2006-07 to 2015-16 has been used. The secondary data for newlineIntangible assets parameters (Goodwill, Other intangible assets, and Total intangible assets), newlineCapital Structure parameters (Shareholder s Fund and Debt-To-Equity ratio), operating profit, newlineand profit after tax have been taken from PROWESS database from CMIE. Only the Impact of newlineintangible assets on the profitability of the organization is also additionally verified and newlineanalysed using primary data collected by using a structured questionnaire. newlineThe results of this research suggest that both Goodwill and other intangibles assets have newlinesignificant positive impact on Operating profit and Profit After Tax for Indian IT sector, hence newlinethis result supports Indian IT industry s increased inclination and decisions of investing into newlineintangible assets and going inorganic too for the growth. But only Goodwill has significant newlinepositive impact on Operating profit and Profit After Tax for Indian Pharmaceutical sector. newlineThe results also suggest that both Goodwill and other intangibles assets have significant newlinepositive impact on shareholder s fund for Indian IT sector, but only Goodwill has significant newlinepositive impact on shareholder s fund for Indian Pharmaceutical sector. newlineThe results also suggest that shareholder s fund has significant positive impact on operating newlineprofit and profit after tax for both Indian IT and Pharmaceutical sectors. newlineThis research also recommends Lev and Schwartz model as the best HR valuation model and newlineInterbrand s Brand Valuation by present earnings model for the Brand valuations. newline