DETERMINANTS OF STOCK PRICE OF NON-LIFE INSURANCE COMPANIES IN NEPAL

Abstract

This study thoroughly investigates the financial performance of three non-life insurance companies listed on the Nepal Stock Exchange (NEPSE): Shikhar Insurance (SICL), Nepal insurance company ltd. (NICL), and Neco Insurance Limited (NIL). The analysis aims to elucidate the impact of key financial indicators—namely Book Value Per Share (BVPS), Market Price Per Share (MVPS), Return on Equity (ROE), Earnings Per Share (EPS), and Price-to-Earnings Ratio (P/E Ratio)—on the stock prices of these firms over the period from 2013/2014 to 2022/2023. The study employs a dual approach for data analysis, integrating both financial and statistical tools. Financial metrics such as EPS and ROE are utilized to assess the companies’ performance, while statistical techniques, including correlation and regression analysis, are applied to explore and quantify the relationships among these variables. This methodology allows for a nuanced understanding of how financial indicators impact stock prices, and helps to clarify the raw data, leading to well-grounded conclusions. Moreover, this study underscores the significance of accounting for both internal financial metrics and external market conditions when evaluating the investment potential and risk profiles of insurance firms in emerging markets like Nepal. By providing a comprehensive analysis of the financial dynamics within the non-life insurance sector, the study offers valuable insights for investors, regulators, and market analysts. It highlights the critical role of financial indicators in shaping stock prices and provides a framework for assessing the financial stability and market value of insurance companies operating in a developing economy. The study’s findings contribute to a better understanding of the factors driving stock price variations and support informed decision-making for stakeholders in the financial sector.