FACTORS INFLUENCEING THE SHARE PRICE OF LIFE INSURANCE COMPANIES IN NEPAL

Abstract

The equity market plays a vital role in economy prosperity that fostering capital formation and sustaining economic growth and has become an essential market. As they ensure the flow of resources to the most productive investment opportunity, they are important for economic growth. Therefore, this study identifies and analyzes the factors influencing the share price of life insurance companies in Nepal. The whole study is based on secondary data and data collected from annual report of selected life insurance companies and supervision reports of central bank (Nepal Rastra Bank). The study has applied the descriptive and causal comparative research design. Only four among fourteen life insurance companies are selected for study purpose as per available information namely National life insurance company, Nepal life insurance company, Life insurance corporation Nepal and Asian life insurance company for the period of 2066/67 to 2078/79. Market price per share is considered as dependent variable while firm specific variables (EPS, BVPS, P/E ratio and firm size) and macro-economic variables (GDP, MS, CPI and remittance) are considered as independent variables for the study purpose. Hypothesis has been taken into consideration with supposition of positive and significant relationship with all independent variables considered above except one i.e., consumer price index which has negative and significant association. Among them my hypothesis has been found true and correct. Hence, the major conclusion of this study is that Nepalese life insurance companies’ market price is highly influenced by the firm specific as well as macro-economic variables. Firm specific variables like earnings per share, book value per share, price earnings ratio and company size are the major determining stock price in the context of life insurance companies. It means increase in firm specific variables higher would be the market price per share. Thus, the Nepalese investors should consider these independent variables in making investment in share market. Key words: Market price per share, Earnings per share, Book value per share, P/E ratio, Firm size, Gross domestic product, Money supply, Consumer price index and Remittance.