Impact of Management on Financial Performance in the Pharmaceutical Industry

ABSTRACT This study examines the impact of board independence, inclusion, research and development (R&D) intensity, and gender diversity on corporate financial performance in the pharmaceutical industry—a critical indicator in financial management. These variables are increasingly relevant to corporate sustainability, especially in the face of a dynamic and highly competitive market environment. Using Partial Least Squares Structural Equation Modeling (PLS‐SEM), on a robust dataset of 296 observations from 80 pharmaceutical companies from around the world over a different year period (2011–2022), the research examines how governance and organizational factors influence financial outcomes, measured by Return on Assets (ROA), Return on Equity (ROE), Return on Sales (ROS), and Tobin's Q. Findings reveal that board independence positively affects financial performance. Additionally, innovation—reflected in higher R&D investment—significantly enhances firm performance, underlining its strategic role in competitiveness and growth. Gender diversity and inclusion are also assessed for their contributions to organizational value. The study offers insights for companies and decision‐makers, highlighting the importance of integrating governance mechanisms into strategic planning to align with corporate goals and improve financial results.