EFFECT OF DIVIDEND POLICY ON SHAREHOLDER WEALTH AND COMPANY PERFORMANCE OF NEPALESE COMMERCIAL BANKS A

Abstract

This study examines the impact of dividend policy on shareholder wealth and company performance in six Nepalese commercial banks: Nabil Bank Limited (NBL), Machhapurchhe Bank Limited (MBL), Agriculture Development Bank Limited (ADBL), Prabhu Bank Limited (PBL), Nepal Bank Limited (NBL), and Everest Bank Limited (EBL). These banks were selected from a total of 20 through convenience sampling. The analysis uses data from annual reports, financial statements, and other relevant documents over the fiscal years 2013/14 to 2022/23. The findings reveal that dividend per share, firm size, and dividend payout ratio significantly influence shareholder wealth and company performance. Earnings per share (EPS) and return on assets (ROA) are directly affected by these variables, highlighting their importance in dividend decisions. Regression analysis shows that firm size does not significantly impact EPS, while dividend per share and dividend payout ratio do, with the former increasing EPS and the latter decreasing it. Similarly, for ROA, firm size has no significant impact, but dividend per share increases ROA, and dividend payout ratio decreases it. These results underscore the critical role of dividend policies in the Nepalese banking sector. Overall, the study highlights the importance of dividend-related metrics in predicting and understanding financial performance, particularly their impact on EPS and ROA. These findings underscore the significant role of dividend payout policies in enhancing shareholder wealth and performance in Nepalese commercial banks.