An Analysis of Share Price Behavior of Commercial Banks in Nepal

Abstract

This study is mainly focused on determining the effect of different financial indicators of commercial banks of Nepal on the market price of those banks. It analyzes how the price fluctuates with respect to different financial indicators such as EPS, DPS, BVPS, PE and DPR. For determining such effects or relations, secondary data has been extensively used. Different statistical and financial tools are employed for the analysis of these parameters. Correlation analysis has been carried out to determine the strength of relation between dependent and independent variables. Simple regression analysis and multiple regression analysis has been done to determine regression equation of the dependent variable on a single and multiple independent variable respectively. Microsoft Excel has been used as the analysis software. The results revealed that the correlation between MPS and other financial indicators varies among different banks. The correlation between MPS and EPS is highest for MBL, while that between MPS and DPS is highest for EBL. Similarly, correlation of MPS with BVPS and DPR are highest for EBL and with PE is highest for SCB. The results of simple regression analysis have been tested by employing t-test, which revealed that there is statistically significant relationship between MPS and all independent variables. The multiple regression analysis of all banks combined revealed that EPS and P/E have a significant effect on the dependent variable, as their t-statistics are large (well above the critical value) and their p-values are very small. DPS, BVPS and DPR are not statistically significant, as their p-values are greater than 0.05, indicating they do not have a meaningful impact on the dependent variable.