DETERMINANTS OF STOCK PRICE OF MICROFINANCE COMPANIES IN NEPAL

Abstract

The main objectives of the study was to analysis of the impact of dividend policy on the stock prices of MFIs in Nepal provides valuable insights into the dynamics shaping market valuation. The regression coefficients reveal that Return on Equity (ROE) holds a statistically significant positive relationship with Market Price Per Share (MPS). This finding suggests that MFIs demonstrating higher returns on equity tend to experience higher stock prices. This positive correlation underscores the market's recognition and reward for MFIs that exhibit robust profitability, aligning with the notion that investors value firms with a history of generating strong returns for shareholders. The ANOVA results bolster the significance of the overall regression model, highlighting that the chosen independent variables collectively contribute to explaining the variability in MPS. The F-statistic of 5.890 with a p-value of .002 reinforces the importance of factors such as ROE in influencing stock prices. This statistical significance underscores the credibility of the model in capturing the impact of dividend policy on market valuation in the context of Nepalese MFIs. Correlation coefficients further elucidate the relationships between variables. The positive correlation between ROE and MPS, statistically significant at the 0.01 level, emphasizes the meaningful connection between profitability and market valuation. MFIs with higher returns on equity are perceived positively by the market, leading to higher stock prices. This positive relationship signifies that investors recognize and reward MFIs that effectively utilize equity to generate profits, contributing to a positive feedback loop in market valuation. This positive correlation serves as a testament to the importance of sound financial performance in shaping investor perceptions and influencing market dynamics. The findings contribute valuable insights for policymakers, investors, and researchers interested in understanding the nuanced interplay between dividend policy and stock prices in the Nepalese banking sector.