Impact of fundamental factors on stock price of Nepalese commercial banks

Abstract

This research explores the impact of fundamental factors on stock price: a case study of Nepalese commercial banks. The primary objectives of the research are to ascertain the correlations between the BVPS, MPS, EPS, DPS, and P/E ratios of Nepalese commercial banks, as well as the effects of fundamental factors on stock prices and how these variables have evolved over time. This study employs a descriptive and informal comparative research design. The descriptive research method is utilized to identify the qualitative factors impacting stock price, while the historical research design is combined with regression analysis and correlation to determine the influence of earnings, book value, dividends, and price earnings ratio. Investigating the relationship between MPS and other financial indicators including BVPS, EPS, DPS, and P/E ratio is therefore the main objective of this study. Several financial and statistical techniques are used to assess the facts, and descriptive approaches are used to identify factors influencing the stock prices of commercial banks in NEPSE. The analysis is based on seven years of data, spanning the fiscal years 2015/016 to 2021/022. All of the variables or observations are collectively referred to as the population. The population of the study comprises solely commercial banks that are registered on the NEPSE and involved in share transactions, while all enterprises listed on the Nepal Stock Exchange are included in the population. The findings display the sample banks' MPS, EPS, DPS, P/E ratio, and BVPS throughout the course of the seven years. The descriptive statistics mean, standard deviation, lowest and highest values of variables associated with seven commercial banks—for the study period of 2015/016 to 2021/022 are provided. The sample banks have an average of 877.7539 and a standard deviation of 769.08489. The sample banks have MPS ranging from Rs. 239 to Rs. 3600. With a standard deviation of Rs. 11.84133 and an average EPS of Rs. 32.4225, the range of values is from Rs. 17.99 to Rs. 59.86. A statistical measure known as the DPS has a range of 11.84 to 105.26, with a mean of 27.7168 and a standard deviation of 18.14153. The BVPS ranges from Rs. 125.17 to Rs. 296.00, with a standard deviation of Rs. 15.44431, and an average of Rs. 199.8511 with a standard deviation of Rs. 46.37967. In contrast, the P/E ratio has a range of 11.15 to 78.33, with an average of Rs. 25.9775. The BVPS relationship (.710**), the EPS relationship (.641**), the P/E ratio relationship (.904**), and the MPS-DPS relationship (.644**) are all significantly positively linked. The relationship between EPS and P/E ratio is significant at the 5% level of significance, whereas the association between MPS and DPS and BVPS is significant at the 1% level of significance. Variation can be explained by the coefficient of determination, often known as the R-square or the model summary. According to Table 4.8, the R-square value is.970, which means that 97% of the variation in the market price of Nepalese commercial banks can be explained by EPS, DPS, and BVPS. Nevertheless, the remaining 0.2% (100% - 97%) is explained by additional factors not addressed in this study. The regression coefficients based on EPS, DPS, P/E ratio, and BVPS are -698.674, 33.095, -.540, 42.964, and -2.991, in that order. Furthermore, because all of the independent P/E ratio's p-values are below the significant level (p < 0.05), Table 4.9 shows that the ratio has a significant outcome.