Factors Affecting Share Price in Insurance Companies (A study on life insurance companies of Nepal)

Abstract

This study examines the factors affecting the share price of Nepalese life insurance companies. Market price per share is selected as dependent variable while earning per share, divided per share, price earnings ratio, dividend payout ratio, and dividend yield ratio were chosen as firm specific independent variables. The data were collected from the insurance and banking statistics and supervision report published by Nepal Rastra Bank and annual report of selected life insurance companies. The correlation and multiple regression models were estimated to test impact of firm specific factors on share price of Nepalese life insurance companies. Using data of 4 insurance companies listed in NEPSE for the period 2012/132018/19,

the result shows that company's specific variables like earnings per share, divided per share, price earnings ratio, dividend payout ratio, and dividend yield ratio are the major determining stock price in context of life insurance companies in Nepal. The correlation between MPS and EPS is 0.654 which is moderate degree positive correlation, similarly MPS and DPS is 0.538, MPS and DPR is 0.225, MPS and PER is 0.486, MPS and DYR is 0.256 respectively. There is positive relationship between market price per share and other dividend variables like, earnings per share, dividend per share, dividend payout ratio, price earnings ratio and dividend yield ratio. Similarly, the value of R-square value as evident from multiple regression is 0.498 which means 49.8 % variation in Market price per share of Nepalese insurance companies is explained by the independent variables. However, the remaining 51.2 % is still unexplained in this research. In order to find out the awareness of investor towards impact of dividend on market price per share self- administrative questionnaire have been distributed among the investors. The response of respondent was positive it means investors are aware about the factors influencing market price of share. Key Words: Market price per share, Dividend per share, dividend payout ratio, price earnings ratio and dividend yield ratio.