IMPACT OF FIRM SPECIFIC VARIABLES ON STOCK PRICE: EVIDENCE FROM NEPALESE COMMERCIAL BANKS

Abstract

The research examines factors that affect the stock prices of commercial banks in Nepal. Using stratified selection, seven commercial banks representing the private, public-private, government-owned, and joint venture categories were selected from a total of twenty banks. In addition to descriptive and causal-comparative designs, the research uses statistical tools such as mean, standard deviation, correlation, and multiple linear regression analysis. Among the significant factors that were examined were books value per share, profits per share, dividends per share, price-earnings ratio, cash reserve ratio, and non-performing loan ratio. The findings indicate that the price-to-earnings ratio, book value per share, and earnings per share all significantly affect stock prices. More precisely, rising price-to-earnings ratios and increasing earnings per share are associated with higher stock prices. Moreover, book value per share positively affects stock prices, highlighting its importance in the evaluation of companies. There is inconsistent research on the link between dividends per share and stock prices; some studies find no discernable association at all, while others show a favorable correlation. The disclosures have important implications for investors and decision-makers in Nepal's commercial banking sector. Investors may utilize these insights to make more educated decisions by focusing on key financial indicators such as the book value per share, earnings per share, and price-to-earnings ratio. Lawmakers may also use this data to create regulations aimed at enhancing the financial stability and appeal of the banking sector. Keywords: Stock Price, Book Value per Share, Earnings per Share, Dividend per Share, Price Earnings Ratio, Cash Reserve Ratio and Non-Performing Loan Ratio