Impact of dividend practices on shareholders wealth and bank performance

Abstract

This research looks at the dividend distribution patterns of Nepalese commercial banks to provide light on how these practices affect company profitability and shareholder wealth. A sample of ten out of the twenty listed banks on the Nepal Stock Exchange (NEPSE) is carefully selected for a comprehensive analysis using a purposive selection approach based on paid-up capital. The study uses a descriptive comparative research approach and spans 10 fiscal years, from 2014-15 to 2023–24. It is centered on secondary data extracted from the selected institutions' yearly reports. For statistical research, including multiple regression, correlation analysis, mean, minimum, and maximum, as well as standard deviation, SPSS and Microsoft Excel are used. The research concludes that there are positive and statistically significant relationships between return on equity (ROE) and the cash dividend per share, stock dividend per share, and dividend payout ratio. Nevertheless, no statistically significant correlations are found between these dividend-related variables and net interest margin (NIM) or return on assets (ROA). The dividend programs provided by the selected institutions are made clearer in terms of their structure and trends by the descriptive research. The findings demonstrate the significance of Dividend Practices for Nepalese commercial banks, particularly in relation to boosting shareholder value via ROE. Further investigation into other pertinent factors is encouraged by the absence of connections found between NIM and ROA. This study provides valuable insights into the intricate aspects of financial performance within Nepal's banking sector. Keywords: Dividend Practices, return on equity, net interest margin, return on assets, financial performance, shareholder wealth.