Financial Performance-Efficiency Nexus in The Healthcare Sector in The GCC Region

Abstract

The health care corporates play a vital role in maintaining the health and sustainability of the entire health system. This study aims to analyze the efficiency of the financial performance and financial characteristics of public listed companies in the healthcare sector in the GCC region during the period 2011–2021 using data envelopment analysis and financial performance indicators. Among the many reasons behind choosing this nonparametric method is that it identifies the sources of inefficiency and specifies the directions and magnitudes of improvements required. Three input-oriented models – CCR under constant and BCC under variable returns-to-scale assumption – are employed for evaluating three types of efficiency: technical, pure technical, and scale efficiency. Two hypotheses are examined and empirically confirmed: first, there is significant firm variability in financial performance, and second, investments are the primary source of inefficiency among the observed indicators. The results have additionally revealed that the mentioned differences are less pronounced in the case of pure technical efficiency, implying that the overall inefficiency of healthcare companies in the sector in the GCC region can be generally attributed to scale efficiency. Finally, narrow, deep subsidiaries level (Hospitals and Pharmaceutical firms) and analyze the financial performance ratios, including the efficiency of different ratios of selling general management expenses, ROIC, ROA, ROE, ROS, total capital growth rate, and growth rates. These results indicate that profitability, growth, and return on invested capital of Hospitals firms are reflected in financial performance in considering superiority in efficiency and growth in pharmaceuticals firms. Also, the results indicate that healthcare companies do not spend or invest in Research and Development (R and D) for technological innovation. This result can reflect the expectation that healthcare companies' profitability, growth, and leverage will be more influenced by future cash flow. The implications of the research results are aimed at further research and testing the efficiency of the entire health care sector and providing policymakers quantitative guidance for policy formulation, with new insights when considering further study and testing the efficiency and financial performance with different assumptions