Empirical effects of earning and dividend policies on market price of share

Abstract

The study analyzes the financial indicators of commercial banks in Nepal, focusing on dividend streams and stock price appreciation. For the study, only descriptive and analytic research designs will be used. The research focuses on three banks: NABIL, NICA, and NBL. The data is based on annual reports from the last ten fiscal years. The study reveals that sample banks in Nepal are earning well, with NABIL being the highest-performing bank. However, there is no consistency in dividend distribution, and NABIL has paid higher dividends than NICA over the past decade. The study identifies core factors that shape equity prices, including EPS, DPS, MVPS, and price appreciation. The study found that these factors are influenced by fluctuations in these financial indicators, with NABIL paying higher dividends than NICA. The study suggests that signaling effects and bidding practices in the banking sector have occupied major parts, and these indicators have fallen into shadow. The average mean EPS of NABIL, NICA, and NBL is Rs. 53.43, 29.87, and Rs. 43.88, respectively. NABIL and NICA have higher earnings per share (CV) and lower DPS (DPS) than NBL. NBL has slightly more consistency in DPS and DPR (CV) than NABIL and NICA. The average MVPS of NABIL is higher than that of NICA and NBL, and NBL has higher consistency. The average P/E ratio of NABIL is less fluctuating (33.79%) than NICA and NBL. The relationship between DPS and EPS is positive (0.868), while NICA's relationship is lowly positive (p value greater than 0.05).

Keywords: dividend policy, MPVS, EPS, DPS, dividends, regression analysis, shares.