Radhika Karki

Research Frame
On
Firm Specific Fundamentals and Banking Stock Returns in Nepal

Figure 1

Flow Diagram Representing the Relationship between Firm Specific Variables and
Banking Stock Returns in Nepal

Independent Variables Dependent Variable

Book to market equity

Firm Size
Earnings Yield Banking Stock Returns
Dividend Yield
Cash Flow Yield

Variables and Measures

1. Banking Stock Returns (Rit) – Proxied by natural logarithm of annual closing market price
per share
- Market price per share
2. Book to Market Equity (BME) – The ratio of net worth to market capitalization of the bank
- Net worth
- Market capitalization
3. Firm Size (Size) – Natural logarithm of the market capitalization/ or natural logarithm of total
bank assets
- Market capitalization of Bank or Total Asset of Bank
4. Earnings Yield (EY) – EPS as a fraction of MPS
- EPS
- MPS
5. Dividend Yield(DY) – DPS as a Fraction of MPS
- DPS
- MPS
6. Cash flow yield (CFY) – Cash flow per share as a fraction of MPS
- Cash flow per share
- MPS
The Model (Functional Form)
Rit = f(BME, Size, EY, DY, CFY)
Nature of Study- Cross sectional
Sample Size – 27 commercial banks
Data length – As many years of data as available from the web sites of respective banks
Observations – Number of Firm year observations