Impact of dividend on market price of stock of development banks in Nepal

Abstract

This study investigates the impact of dividend on stock price in development banks of Nepal. The secondary data was gathered from development banks of Nepal for ten years periods (2013/14-2022/23). This study used descriptive and causal relationship research design to analyze the impact of dividend on market price of stock of development banks. This study has employed descriptive analysis, correlation analysis and multiple regression analysis. This study reveals that Nepalese development banks have distributed dividend to the shareholders but these banks have not been following stable dividend payout policy. A wide range of market stock price is found. However, the dividend yield is low percent with the less volatile position of development banks in Nepal. This study also shows that the correlation analysis earning per share, price earnings ratio, dividend payout ratio and return on assets have positive and significant relationship with market price of stock in Nepalese development banks. However, dividend yield has negative and significant relationship with MPS and bank size has insignificant negative relationship with MPS of the banks. The regression result reveals that earning per share and price earnings ratio have significant positive effect on MPS of development banks in Nepal. Dividend yield has insignificant negative impact on market price of stock. Then, return on assets (ROA) and bank size have insignificant positive effect on market price of stock. Hence, dividend payout ratio has positive insignificant impact of stock price of Nepalese development banks. The implication of the findings is that devoting adequate time in designing and disseminating a dividend policy are desired in improving the performance of listed companies and enhancing the stock price in the pre-emerging capital markets. As the paper addresses the gap in the extant literature, the findings could be useful for research scholars, financial analysts and investors. Key words: Market price per share, earning per share, price earnings ratio, dividend payout ratio, dividend yield, and bank size.