IMPACT OF MACROECONOMIC VARIABLES ON PROFITABILITY OF FINANCE COMPANIES IN NEPAL

Abstract

This study is conducted to analyze the Impact of Macroeconomic Variables on profitability of Finance Company in Nepal. The study variables used in this study are for this study Capital adequacy ratio (CAR), Lending Ratio (LR), Inflation (INF), Default Risk (DR), Operational Expenses to Total Loan (OETL), and Return on equity (ROE) is calculated. To analyze the data a combination of descriptive and casual comparative research design has been used in this study. This study considered only five finance company Gurkhas Finance, Goodwill Finance, Nepal Finance, ICFC Finance, Reliance Finance as a sample finance company. This study is totally based on secondary data which are collected from the annual reports of sample finance company from year 2013/14 to 2022/23 covering recent ten year’s data. The relationship of Return on Equty of finance company in Nepal taking the independent variables in finance this study Capital adequacy ratio (CAR), Lending Ratio (LR), Inflation (INF), Default Risk (DR), Operational Expenses to Total Loan (OETL) conclude that defult risk (DR) is positive and low positive relationship also which insignificant relationship with profitability. In other hand Profitability and OETL is positive relationship also which in not significant relationship . The relationship between the profitability and lending ratio is negetive and low level of relationship but not perfectly and also which in insignificant relationship. The effect of Capital adequacy ratio (CAR), Lending Ratio (LR), Inflation (INF), Default Risk (DR), Operational Expenses to Total Loan (OETL) using the multiple regression analysis in this study conclude that ratio (CAR), Lending Ratio (LR), Inflation (INF), Default Risk (DR), Operational Expenses to Total Loan (OETL) are the major factors affecting the profitability of finance company Nepal. On the other hand, it is concluded that, loan loss provision ratio of the banks does not influence the profitability of development banks in Nepal.