Factors affecting profitability of finance companies in nepal

Abstract

The study is entitled “Factors Affecting Profitability of Finance Companies in Nepal”. The study deals with the study of profitability in Nepalese financial companies. The main objective of the study is to have comparative study on profitability of finance companies in Nepal. The study has been conducted having five finance companies out of total 17 listed finance companies in NEPSE. The samples have been chosen on the basis of top five highest paid-up capital finance companies. The total number of observations is fifty having ten years annual reports i.e. financial data of five sample banks. As per research design descriptive and causal comparative research design have been employed. The statistical tools consist of mean, standard deviation and range as well as the inferential statistic consists of mainly correlation and multiple linear regression analysis for cause and effect relationship between and among undertaken variables such as dependent i.e. profitability (return on equity and net profit margin) and independents non-performing loan ratio, dividend per share, price earnings ratio, market price per share and earnings per share. Similarly, the relationship between non-performing loan ratio (NPLR) and the dependent variable (ROE) is not statistically significant. It means that there is no real relationship between NPLR and ROE, and the coefficient for NPLR is unlikely to reflect a genuine relationship between the two variables. Similarly, the average net profit margin (NPM) has a deviation, indicating the need for thorough analysis of a firm's financial performance. Positive NPM is crucial, while negative NPM may indicate financial struggles. Therefore, finance companies should focus on reducing non-performing loans and maintaining a positive net profit margin to improve their profitability.

Keywords: Market Price per Share, Earnings per Share, Net Profit Margin, Dividend per Share, Price Earnings Ratio, Return on Equity