Title:
An Empirical Assessment of Factors Impacting Stock Prices of Nepalese Commercial Banks

Authors:
Pramod Dahal, Ramjee Puri, Pawan Dahal, Bipin Budhathoki, Nepal

Abstract:

This study examines the impact of various financial variables on the pricing of commercial banks in Nepal. Key financial metrics analyzed include earnings per share, dividend yield, price-to-earnings (P/E) ratio, earnings yield, book value per share, money supply, market-to-book value ratio, and stock return. The research highlights the importance of market financial ratios in the investment decisions of Nepalese investors. Using data from 10 out of 20 commercial banks listed on the Nepal Stock Exchange, spanning 110 yearly observations from fiscal years 2012/13 to 2022/23, multiple regression models were employed to determine the relationships between these factors. The findings reveal that earnings per share, dividend yield, P/E ratio, book value per share, money supply, market-to-book value ratio, and stock return are significantly positively correlated with the prices of commercial banks. Conversely, earnings yield shows a negative correlation. Despite the strong preference for price and profitability metrics, the study's limited sample size and focus on commercial banks may affect the generalizability of the results. This research provides critical insights, particularly emphasizing the importance of earnings per share, dividend yield, P/E ratio, and book value per share in guiding investors' financial decisions in Nepal. The findings are anticipated to benefit investors, scholars, policymakers, and other stakeholders by enhancing their understanding of the factors influencing stock prices in the Nepalese banking sector.

DOI: https://doi.org/10.51505/IJEBMR.2024.8704