Impact of Market Valuation Variables on Stock Prices of Nepalese Commercial Banks

Abstract

ABSTRACT The stock market, represented by exchanges like the Nepal Stock Exchange (NEPSE), is a crucial element in the financial system, facilitating the buying and selling of shares in publicly traded companies. Influenced by factors like company performance, economic conditions, and investor sentiment, the dynamic marketplace relies on key market valuation variables such as Earnings Per Share (EPS), Dividend Payout Ratio (DPR), and Price-toEarnings (P/E) Ratio to shape the stock prices of commercial banks in Nepal. The primary aim of this study is to examine how market valuation impacts the stock prices of Nepalese commercial banks. Specific objectives include scrutinizing the structure and patterns of EPS, book value per share, P/E ratio, DPR, bank size, dividend per share, and market price. Using a descriptive research design for an accurate portrayal and a causalcomparative approach to establish cause-and-effect links, the study analyzes data from six selected commercial banks for the period of 2013/14 to 2021/22. Variables studied include MPS, stock return (SR), EPS, DPS, P/E ratio, bank size, BVPS, and DPR, with sample selection considering bank reputation and profitability levels. The research yields valuable insights into the complex relationship between financial variables and stock prices in Nepalese commercial banks. It not only supports existing theories but also uncovers unique patterns in the local context. Focusing on EPS, DPS, P/E ratio, BVPS, DPR, and bank size, the study sheds light on the nuanced dynamics within the Nepalese financial market. In conclusion, the study enhances understanding of the Nepalese commercial banking sector, highlighting the significance of market valuation metrics in influencing stock prices. The findings offer actionable insights for analysts, investors, and policymakers, emphasizing the need for continuous adaptation of financial theories to address specific market nuances. Acknowledging limitations, such as the study's focus on six out of 20 banks, reliance on secondary data, and the exclusion of external factors, underscores the potential for a more comprehensive examination. Keywords: financial metrics, market valuation, Nepalese stock market, stock return, trend analysis.