MACROECONOMIC VARIABLES AND FINANCIAL PERFORMANCE OF COMMERCIAL BANK IN NEPAL

Abstract

This study to examine Macroeconomic Variables And Financial Performance Of Nepalese Commercial Banks. Return on Assets and Return on Equity are the dependent variables. The independent variables are Gross domestic product, Public expenditure, Inflation rate, Balance of payment, Broad money supply, Consumer price index and Exchange rate with US$.Three commercial banks are selected as sample bank. Secondary data were collected from Nepal Rasta bank, annual report of commercial banks and published articles for Fiscal years from 2013/14 to 2022/23. Data were analyzed by using financial tools and statistical tools. The Descriptive and casual comparative research design was used. The correlation and multiple regression models are used to explain the relationship and test the significance between Macroeconomic and financial performance on Nepalese commercial banks. The result shows that Return on Assets (ROA) and Return on Equity (ROE) are presented alongside macroeconomic indicators such as Gross Domestic Product (GDP), Inflation (Inf), Public Expenditure (PE), Balance of Payments (BOP), Money Supply (M2), Consumer Price Index (CPI), and Exchange Rate (exr). These statistics establish a foundation for subsequent analysis. Examining the correlation matrix reveals significant relationships between certain macroeconomic variables and both ROA and ROE. Particularly noteworthy is the strong positive correlation between ROA and ROE, indicating a parallel increase in returns on assets and returns on equity. Additionally, the negative correlation between GDP and ROA implies that fluctuations in GDP may impact commercial banks' financial performance in Nepal.