Effect of dividend on Stock market price of commercial banks of Nepal

Abstract

The income of company that the company pays to the shareholder from the investment they have made called a dividend. One of the vital but tricky task of managers is payment of dividend to its shareholders. Dividend payment and market price of commercial banks of Nepal are studied in this dissertation. The secondary data of various commercial sample banks are collected from the various for ten-year periods (2067/68-2077/78). Descriptive, correlation and multiple regression analysis are used for the analysis of the thus collected data. The findings of the study reveal that the highest cash dividend is distributed by HBL and the highest bonus share is paid by SBL to its shareholder. This study shows that HBL has paid the highest cash dividend and SBL has paid the highest bonus dividend to shareholders. The market price of HBL is highest among the sample bank in the share market which means that the bank performs the best in share market over the study duration. The correlation coefficient of market price per share with earning per share, bonus share, dividend per share and return on assets are 0.689, 0.621, 0.594 and 0.613 respectively. Further, market price per share has significant positive relationship with EPS, BS, DPS and ROA. But, cash dividend has negative and insignificant relationship with market price with correlation coefficient of 0.060. The analysis of regression depicts that market price per share has significant positive relation with earning per share with p value of 0.004 and significant negative impact with cash dividend with p value of 0.000. And dividend per share and return on assets have insignificant positive impact on market price per share of the sample commercial banks with p-value 0.594 and 0.114 respectively. The past market prices per share and distribution of dividend to shareholders are shown in the study. This study is helpful for investors investing in stock market and managers of bank as managers can use the findings of the study to recommend the best dividend payment. More research on the subject, utilizing additional industry and macroeconomic data, is necessary for more trustworthy findings. Key words: Market price per share, earning per share, cash dividend, bonus share, dividend per share, return on assets.