Impact of Dividend Practice on Share Price of Finance Companies in Nepal

Abstract

Factor xii ABSTRACT Dividend policy, representing the portion of a company's earnings distributed to shareholders, is a subject of considerable interest and debate in both global and Nepalese financial markets. The specific influence of dividend policies remains a focal point, particularly in Nepal, where dividend practices vary among finance companies. This study investigates the impact of dividend practices on share prices of Nepalese finance companies, aiming to provide insights into investor behavior and market reactions. The problem statement revolves around understanding the relationship between dividends and share prices in Nepal's finance sector. The research design entails a quantitative approach utilizing descriptive statistics and a causal-comparative research design. The population includes 17 finance companies operating in Nepal, with a sample of 10 finance companies selected through convenience sampling. Data were collected from published annual reports, quarterly reports, and finance companies’ websites like Merolagani and ShareSansar. Statistical tools such as correlation analysis and regression analysis were employed, along with financial metrics like dividend payout ratio (DPR), earnings per share (EPS), and market price per share (MPS). The research framework outlines the interplay between these variables, highlighting their roles in influencing share prices. The analysis reveals weak correlations between financial variables and MPS, with no statistically significant findings. While DPR exhibited a weak negative correlation with MPS, EPS, DPS, and PER displayed weak positive correlations. However, none of these impacts were statistically significant, indicating limited predictive power in explaining MPS changes. Implications suggest investors should consider a broader range of financial metrics, while financial companies should diversify risk management strategies. Theoretical contributions include empirical evidence of weak correlations, emphasizing the need for further research to identify additional influencing factors. Keywords: Dividend practices, Share prices, Nepalese finance companies, Correlation analysis, Regression analysis.