DETERMINANTS OF SHARE PRICE OF NEPALESE FINANCE COMPANIES

Abstract

The dissertation employed a combination of descriptive and causal-comparative research designs to investigate the factors influencing market valuations in the finance sector of Nepal. By focusing on 17 finance companies in Nepal, the research selected a sample comprising ICFC, Manjushree, and Reliance Finance based on their highest paid-up capital. Data collection involved gathering internal and external variables affecting market prices from company reports, annual reports, and regulatory authorities. Statistical tools such as mean, standard deviation, correlation, and regression analysis were applied to analyze the collected data, utilizing financial metrics like Earnings per Share (EPS), Dividend Per Share (DPS), Gross Domestic Product (GDP), Inflation (Inf), Return on Assets (ROA), Return on Equity (ROE), and Market Price of Share (MPS) to examine the relationships between variables. The findings of the study revealed several key insights into the determinants of share prices in Nepalese finance companies. Firstly, a significant positive correlation was observed between earnings per share (EPS) and market price per share (MPS), suggesting that higher earnings were associated with higher market share prices. This correlation underscored the importance of profitability as a key driver of investor confidence and valuation in the Nepalese finance sector. Secondly, the regression models used in the study demonstrated statistical significance, indicating that the selected predictors collectively contributed to explaining the variance in MPS. This finding highlighted the meaningful roles played by factors such as EPS, dividend-related metrics, and economic indicators in shaping market prices and investor perceptions. Furthermore, the study recognized the impact of dividend-related metrics on MPS, indicating that dividend policies influeThe dissertation employed a combination of descriptive and causal-comparative research designs to investigate the factors influencing market valuations in the finance sector of Nepal. By focusing on 17 finance companies in Nepal, the research selected a sample comprising ICFC, Manjushree, and Reliance Finance based on their highest paid-up capital. Data collection involved gathering internal and external variables affecting market prices from company reports, annual reports, and regulatory authorities. Statistical tools such as mean, standard deviation, correlation, and regression analysis were applied to analyze the collected data, utilizing financial metrics like Earnings per Share (EPS), Dividend Per Share (DPS), Gross Domestic Product (GDP), Inflation (Inf), Return on Assets (ROA), Return on Equity (ROE), and Market Price of Share (MPS) to examine the relationships between variables. The findings of the study revealed several key insights into the determinants of share prices in Nepalese finance companies. Firstly, a significant positive correlation was observed between earnings per share (EPS) and market price per share (MPS), suggesting that higher earnings were associated with higher market share prices. This correlation underscored the importance of profitability as a key driver of investor confidence and valuation in the Nepalese finance sector. Secondly, the regression models used in the study demonstrated statistical significance, indicating that the selected predictors collectively contributed to explaining the variance in MPS. This finding highlighted the meaningful roles played by factors such as EPS, dividend-related metrics, and economic indicators in shaping market prices and investor perceptions. Furthermore, the study recognized the impact of dividend-related metrics on MPS, indicating that dividend policies influenced investor decision-making and market valuations. While the strength of this influence varied, the consistent recognition across studies emphasized the significance of dividends as a factor driving share prices in the Nepalese finance sector. Lastly, a positive correlation was observed between Return on Assets (ROA), Gross Domestic Product (GDP), and MPS, suggesting that companies with higher returns on assets and those operating in growing economies tended to have higher market prices per share. This finding underscored the importance of strong financial performance and economic growth in driving market valuations in Nepalese finance companies. xi In essence, the findings of this study provide valuable insights for investors, policymakers, and finance professionals in understanding the determinants of share prices in Nepalese finance companies. By recognizing the importance of factors such as profitability, dividend policies, and economic indicators, stakeholders can make informed decisions to enhance market efficiency and investor confidence in the Nepalese finance sector. Keywords: Earnings Per Share, Dividend Per Share, Return on Equity, Return on Assets, Gross Domestic Product, Inflation, Market Price Per Share nced investor decision-making and market valuations. While the strength of this influence varied, the consistent recognition across studies emphasized the significance of dividends as a factor driving share prices in the Nepalese finance sector. Lastly, a positive correlation was observed between Return on Assets (ROA), Gross Domestic Product (GDP), and MPS, suggesting that companies with higher returns on assets and those operating in growing economies tended to have higher market prices per share. This finding underscored the importance of strong financial performance and economic growth in driving market valuations in Nepalese finance companies