Factors affecting profitability of finance companies in Nepal

Abstract

The study is entitled “Factors Affecting Profitability of Finance Companies in Nepal”. The study deals with the study of profitability in Nepalese financial companies. The main objective of the study is to have comparative study on profitability of finance companies in Nepal. The study has been conducted having five finance companies out of total 17 listed finance companies in NEPSE. The samples have been chosen on the basis of top five highest paid-up capital finance companies. The total number of observations is fifty having ten years annual reports i.e. financial data of five sample banks. As per research design descriptive and causal comparative research design have been employed. The statistical tools consist of mean, standard deviation and range as well as the inferential statistic consists of mainly correlation and multiple linear regression analysis for cause and effect relationship between and among undertaken variables such as dependent i.e. profitability (return on equity and net profit margin) and independents non-performing loan ratio, dividend per share, price earnings ratio, market price per share and earnings per share. In conclusion, the relationship between NPLR and NPM has a coefficient indicating a potential impact, but the p-value is higher than the commonly used threshold of 0.05, suggesting there is not enough evidence to support a significant relationship. The relationship between DPS and NPM has a similar result, with a low coefficient and a high p-value indicating a lack of significant effect. The relationship between PER and NPM has a coefficient that is close to being significant, with a t-statistic and p-value that suggests the relationship is nearly significant. The relationship between MPS and NPM has a coefficient of zero and a high p-value, indicating no significant relationship. Finally, the relationship between EPS and NPM has a coefficient that is not significant, with a t-statistic and p-value that supports the conclusion of no significant relationship. Key Words: Market Price per Share, Earnings per Share, Net Profit Margin, Dividend per Share, Price Earnings Ratio, Return on Assets, Return on Equity