Efficiency Changes of Pharmaceutical Companies in Bangladesh An Application of Malmquist Indices

Abstract

Research purpose: This research seeks to assess the efficiency changes of the pharmaceutical companies in Bangladesh over the study period.
Design/methodology/approach: The study collects secondary data from 11 randomly selected pharmaceutical companies out of 34 listed on the Dhaka Stock Exchange (DSE). The present research spans the period from 2014 to 2023. It employs Data Envelopment Analysis (DEA)-based Malmquist
Indices (MI) to analyze efficiency changes.

Findings: The empirical findings reveal overall positive efficiency improvements of the sampled pharmaceutical companies, with increases of 97 per cent in technical efficiency, 28 per cent in technological efficiency, 1 per cent in pure efficiency, 59 per cent in scale efficiency, and 97 per cent
in total factor productivity during the study period. The research’s significant findings underscore the pharmaceutical companies’ efficiency landscape in terms of gross profit, highlighting the role of independent variables such as cost of goods sold, share capital, total liabilities, operating expenses, and total assets.

Originality/value: The study offers a comprehensive analysis of efficiency changes in DSE-listed pharmaceutical companies in Bangladesh. It provides original insights into the key factors driving productivity growth in the industry. Practical implications: This study suggests developing appropriate policies and making necessary adjustments to improve the efficiency score of the underlying pharmaceutical companies, thereby
promoting competitiveness and sustainable growth in both domestic and international healthcare markets.
Research limitations: This study is limited by its relatively small sample size of 11 pharmaceutical companies in Bangladesh, which spans a 10-year study period from 2014 to 2023. On the other hand, for measuring efficiency changes, only DEA-based MI is used.