DETERMINANTS OF SHARE PRICE OF NEPALESE MICROFINANCE

Abstract

Most prior studies in Nepal on determinants of share prices were performed on commercial banks, but not sufficient research have been performed to provide core prospective on the determinants of share price of microfinances. Therefore, this study focuses to examine the determinants of share price of microfinances in Nepal. Market share price has been selected as dependent variable while earnings per share, divided yield, price earnings ratio, dividend payout ratio and return on asset of microfinances has been chosen as firm specific independent variables. For analysis, secondary data have been collected from the NEPSE and annual report of selected microfinance from 2013/2014 to 2022/23. The descriptive statistics, Pearson’s correlations and multiple regression model have been estimated to test impact of firm specific factors on share price of Nepalese microfinance. Using Pearson correlation analysis, the result reveals that share price is significantly positively related to DPR, EPS, P/E and ROA but negative relation with DY. Similarly, coefficient of determination (R-square) of model is 0.895. It also shows that F-value is about 23.843, and the p-value is equal to 0.000, which means that explanatory variable is significantly associated with the dependent variable. The study also found that the EPS, P/E and ROA to have the significant positive association with share price. While DY showed the inverse association with share price, DPR showed a positive correlation with share but both variables’ correlations coefficients are not statistically significant. Regression analysis showed that EPS and P/E has strong association with MPS of microfinances with respective p-values of 0.001 and 0.000. The study concludes that P/E and EPS are the most influencing factors in determining share price in Nepalese microfinances. Further studies with larger sample size, increased time- period of study, size of the bank etc. can be considered to better gauge at the determinants of the share prices of microfinances in Nepal.