FACTORS AFFECTING SHARE PRICE OF FINANCE COMPANIES OF NEPAL

Abstract

Studying stock prices is essential for making informed investment decisions, understanding market and economic trends, evaluating corporate performance, and ensuring efficient resource allocation and effective risk management.This study investigates into the crucial task of analyzing the impact of financial ratios on share prices within the finance sector. Employing a descriptive research design, the study thoroughly examines key financial indicators, Return on Asset (ROA), Non-Performing Loan to Total Loan and Advance (NPL/TLA) ratio, Book Value Per Share (BVPS), Earnings Per Share (EPS), Dividend Payout Ratio (DPR), Lending Interest Rate (LIR), Return on Equity (ROE), and Market Price per Share (MPS). Focusing on three prominent national finance companies: Gurkha Finance company, Manjushree finance company, and ICFC finance company, the research ensures a robust sampling method through purposive sampling technique. The findings underscore the paramount importance of Ln BVPS (natural logarithm of book value per share), revealing a significant impact on Log MPS, with a notable coefficient of 1.914 and a low p-value of 0.002. This suggests a strong positive correlation between BVPS and Log MPS, signifying that each unit increase in BVPS corresponds to an approximate 1.914 unit increase in Log MPS, all other factors held constant. This finding accentuates the pivotal role of BVPS in interpreting market dynamics; higher BVPS values likely indicate stronger asset worth relative to outstanding shares, thereby influencing market sentiment and resulting in higher MPS. Consequently, stakeholders can leverage BVPS as a pivotal factor in investment analysis, offering crucial insights into market valuation and facilitating informed decision-making processes. Overall, this study enhances comprehension of stock price determinants in the Nepalese finance sector, furnishing invaluable findings for investors, analysts, and policymakers alike.