Factors Affecting the Share Price in Nepalese Commercial Banks

Abstract

he focus of this thesis is to analyze the factors affecting the share price of commercial banks in Nepal over the period 2013-2017. In the present study, Bivariate Correlation and a linear multiple regression models are selected to measure the effects of explanatory variables on the depend ant variables. The data are collected from the annual reports of selected commercial banks, annual report of SEBON,report of Nepal Rastra Bank and other official and unofficial publications. Data areanalyzed by using appropriate financial and statistical tools and the descriptive research design is used. The Bivariate correlation is use to examine the relationship between independent and dependent variable. The finding from the study shows that there is positive correlation between EPS, P/Eratio, BVPS and ROA of the bank with MPS. Since the values of correlation coefficients among the independent variables are found to be less than 0.9; implying the absence multi collinearity. Similarly, the multiple regression models are used totest the impact of internal factors on stock price. This study indicate that EPS, P/E ratio and BVPS have significant positive impact on MPS but ROA has insignificant impact on market price of share. It means ROA has no explanatory power toward stock price movement.The R-square a measure of the overall fitness of the model indicates that the model is capable of explaining about 88.1% of the variability in the share prices of banks. This means that the model explains about 88.1% of the systematic variation in the dependent variable. That is,11.9% of the variations in market price of the sampled banks are accounted for by other factors not captured by the model. The result could not be generalized at this movement due to small sample size and there is a need for extensive research on this issue in Nepal.