IMPACT OF EARNING PER SHARE, DIVIDEND PER SHARE AND SIZE ON

STOCK PRICE OF COMMERCIAL BANK OF NEPAL

By

Sandesh Silwal

TU Registration. No: 72002200

Exam Roll No: 16283/15

A Summer Project Report Submitted to

Faculty of Management, Tribhuvan University

In partial fulfillment of the requirements for the degree of

Bachelor of Business Administration

at the

Patan Multiple Campus

Tribhuvan University

Patandhoka, Lalitpur

May, 2019
 DECLARATION

This is to certify that I have completed the Summer Project entitle “Impact of
Earning Per share, Dividend per share & Size on Stock price of commercial
bank of Nepal under the guidance of Dr. Yuga Raj Bhattarai in partial fulfillment of
the requirements for the degree of Bachelor of Business Administration(BBA) at
Faculty of Management, Tribhuvan University.

Date: May, 2018

Signature:
Name: Sandesh Silwal

2
 CERTIFICATE FROM SUPERVISOR

This is to certify that the summer project entitled “Impact of Earning Per Share,
Dividend Per Share & Size on Stock Price of Commercial Bank of Nepal” is an
academic work done by “Sandesh Silwal” submitted in the partial fulfillment of the
requirements for the degree of Bachelor of Business Administration at faculty of
management, Tribhuvan University under my guidance and supervision.

-------------------------------
Signature of the Supervisor
Name: Yuga Raj Bhattarai
Date: May,2019

3
 VIVA-VOCE SHEET

We have conducted the viva-voce examination of the summer project report presented

Submitted By:
Sandesh Silwal
Patan Multiple Campus
Patandhoka, Lalitpur
TU Registration Number: 72002200252015

Entitled:
Impact of Earning Per share, Dividend per share & Size on Stock price of
commercial bank of Nepal

We found the summer project report to be the original work of the student and written
according to the prescribed format. We recommend the summer project report to be
accepted as partial fulfillment for the degree of Bachelor of Business
Administration (BBA).
Viva-Voce Committee

Head, Research Department ………………………

Member (Supervisor) ………………………

4
Member (External Expert) ………………………
Date: ………………………

ACKNOWLEDGMENT

I would like to express my heartfelt gratitude to all those who have helped me to prepare
this project report.

I would like to thank Tribhuvan University for providing us such project work to
broaden our theoretical knowledge into real practical life. And also want to thank my
college, Patan Multiple Campus for guiding me for the completion of the project. I am
also thankful to Dr. Yuga Raj Bhattarai, Program Director of Patan Multiple Campus
for his direct and indirect support during my research that counts in my study.

I would like to express my sincere thanks to Dr.Yuga Raj Bhattarai, my supervisor for
the summer project for guiding me throughout. His suggestions were very useful and
have helped me to a successful completion of this report. I would also like to thank
my friends for helping me when necessary.

Sandesh Silwal
Patan Multiple Campus

5
 Table of Contents

Certificate from Supervisor................................................................................................. ii

Viva-Voce sheet ..................................................................................................................
iv
Declaration ........................................................................................................................
iv
Acknowledgment ..................................................................................................................
v
Table of Contents ...............................................................................................................
vi
List of Tables ....................................................................................................................
viii
List of Figures ....................................................................................................................
ix
List of Abbreviation..............................................................................................................
x
Executive Summary ............................................................................................................
xi
Chapter-I Introduction ......................................................................................................
1
1.1 Context Information ..................................................................................................
1
1.2 Statement of the Problem ..........................................................................................
2
1.3 Objectives of the Study .............................................................................................
2
1.4 Significance of the Study ..........................................................................................
2
1.5 Literature Survey .......................................................................................................
3

6
 1.5.1 Conceptual Review .............................................................................................
3
1.5.2 Review of Related Studies ..................................................................................
4
1.5.3 Concluding Remarks ..........................................................................................
7
1.5.4 Conceptual Framework.......................................................................................
7
1.6 Research Methods .....................................................................................................
8
1.6.1 Research Design .................................................................................................
8
1.6.2 Data Collection Procedure ..................................................................................
9
1.7 Population and Sample ..........................................................................................
9
1.7.1 The Variables and Hypotheses ...........................................................................
9
1.7.2 Data Analysis Tools.......................................................................................... 11
1.8 Limitation of the Study ...........................................................................................
13
1.9 Organization of the Study .......................................................................................
13
Chapter-II Data Presentation and Analysis ...................................................................
14
2.1 Organization Profile ................................................................................................
14
2.2 Data presentation .....................................................................................................
17
2.2.1 Data presentation of Stock price ....................................................................... 17
2.1.2 Data presentation of EPS .....................................................................................
19
2.1.3 Data presentation of DPS ................................................................................. 21
2.1.4 Data presentation of Size .................................................................................. 23

7
 2.2 Descriptive statistics of Study Variables .................................................................
25
2.3 Result from Correlation Analysis ............................................................................
27
2.4 Result from Regression analysis .............................................................................
28
2.5 Findings and Discussion .........................................................................................
29
Chapter III Conclusion and Action Implication ............................................................
30
3.1 Conclusion ...............................................................................................................
30
3.2 Action implication ...................................................................................................
30
References Appendices

List of Tables

Table 2. 1 Data Analysis of Stock Price of MBL, NABIL, SBL and SCB ...................................
17
Table 2. 2 Data Analysis of EPS of MBL, NABIL, SBL and SCB ..............................................
19
Table 2. 3 Data Analysis of DPS of MBL, NABIL, SBL and SCB.............................................. 21
Table 2. 4 Data Analysis of size of MBL, NABIL, SBL and SCB ...............................................
23
Table 2. 5 Descriptive Statistics of Study Variables ..................................................................... 25
Table 2. 6 Correlation of Selected Bank ....................................................................................... 27
Table 2. 7 Regression of Selected Bank ....................................................................................... 28

8
9
 List of Figures

Figure 2. 1 Trend of Stock Price of MBL, NABIL, SBL and SCB ..............................................
18
Figure 2. 2 Trend Chart of EPS of MBL,NABIL, SBL and SCB ................................................
20
Figure 2. 3 Trend Chart of DPS of MBL, NABIL, SBL and SCB ...............................................
22
Figure 2. 4 Trend Chart of Size of MBL, NABIL, SBL and SCB ...............................................
24

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 List of Abbreviation

Acronym Full Form

DPR Dividend Payout Ratio

DPS Dividend Per Share

EPS Earning Per Share

MBL Machhapuchchhre Bank Limited

SBL Siddhartha Bank Limited

SCB Standard Chartered Bank

SD Standard Deviation

TA Total Assets

EXECUTIVE SUMMARY

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This study was performed with an objective of determining the association of the
factors EPS, DPS and size the impact of those factors on Stock price. The independent
variables used in the study were EPS, DPS & Size and the dependent variable was
Stock price. Four commercial banks were taken as a sample out of the total
twentyeight banks. A period of ten years was considered for the study.

Previous studies and documents regarding stock price and its determinants were
reviewed in order to conclude which factors that potentially could have an impact on
the companies. It was found that there are several determinants of stock price of
commercial bank of Nepal. Out of those determinants, only three determinants were
taken for the study to assess the impact it posed on stock price.

The study follows descriptive and exploratory research method and uses correlation
analysis and regression analysis to examine the relationship between the dependent
and independent variables. The result showed that two independent variables ie EPS
and DPS possessed a significant relationship with the dependent variable
Chapter-I Introduction

1.1 Context Information

Nepal is a least developed country resulting lower per-capita income. However, in
recent days, many reforms have been made in the financial sector of Nepal like
liberalization of interest rates, the creation of a basic regulatory framework and
development of longer-term government securities market. Participation of private
sector in the financial sector will play an important role in the economic development
of the country.

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Stock price refers to the cost of purchasing a security on an exchange. Stock prices
can be affected by a number of things including volatility in the market, current
economic conditions, and popularity of the company. The stock market refers to the
collection of markets and exchanges where regular activities of buying, selling and
issuance of shares of publicly-held companies take place. Such financial activities are
conducted through institutionalized formal exchanges or over-the-counter (OTC)
marketplaces which operate under a defined set of regulations. There can be multiple
stock trading venues in a country or a region which allow transactions in stocks and
other forms of securities. While both terms - stock market and stock exchange - are
used interchangeably, the latter term is generally a subset of the former. If one says
that she trades in the stock market, it means that she buys and sells shares/equities on
one (or more) of the stock exchange(s) that are part of the overall stock market.
Leading stock exchanges in the U.S. include the New York Stock Exchange (NYSE),
Nasdaq, BATS and Chicago Board Options Exchange (CBOE). These leading
national exchanges, along with several other exchanges operating in the country, form
the stock market of the U.S. The Stock market of Nepal is called NEPSE.

Though it is called a stock market or equity market and is primarily known for trading
stocks/equities, other financial securities - like exchange traded funds (ETF),
corporate bonds and derivatives based on stocks, commodities, currencies and bonds -

13
are also traded in the stock markets. The Stock market of Nepal is called NEPSE
which is regulated by Security Board of Nepal (SEBON). Stocks of 27 commercial
banks among 28 are listed in NEPSE.

The present study deals with an attempt to analyze the impact of EPS.DPS & size on
share price of commercial banks on the basis of financial statements information in
Nepalese context. The objective of this study is to examine the impact of the internal
factor on the stock prices of Nepalese commercial banks. In the light of the above
mentioned objective, the remaining part of this study is structured as follows: the next
section presents statement of problem, theoretical framework and reviews of
literature; this section is followed by research methods used in the study. The second
last section provides empirical results and discussion, and the final section offers
conclusion of the study.

1.2 Statement of the Problem

The stock price determination is one of the most debated topics within corporate
finance and many academics have been trying to find the missing pieces in the puzzle
for more than a half century. The study is directed to resolve the following issues:

• What is the position of Stock price of selected bank?

• What is the relation of stock price of selected bank with Earning Per Share,
Dividend per share & Size?
• What is the impact of EPS, DPS & Size on stock price of selected bank ?

1.3 Objectives of the Study

The following are the objective of the study:
• To examine the existing stock price behavior of selected banks.
• To observe the relationship between the dependent and independent variables
used in this study.
• To assess the impact of EPS, DPS, Size on Stock price of selected bank

2
 1.4 Significance of the Study
A company's stock price reflects investor perception of its ability to earn and grow its
profits in the future. Typically, the higher the stock price, the more optimism about the
company's prospects. A favorable stock price is critical for a company seeking equity
financing. Companies initially receive capital with an initial public offering of a
company's shares. However, additional share issuances can be used to raise billions of
dollars in capital. Equity financing allows a company to fund expansion efforts, pay
down debt, and purchase other companies.
This might prove to give necessary and important information to these selected
sample banks. The shareholders and personnel’s of the organization may take benefits
from this study.

1.5 Literature Survey

A literature review is an evaluative report of information found in the literature related
to your selected area of study. Literature review consists of a review of finance
theories related to the study, literature as derived from research work by other
researchers, some general literature to aid in further understanding the purpose and a
summary.

1.5.1 Conceptual Review

A share price is the price of a single share of a number of saleable stocks of a
company, derivative or other financial asset. In layman's terms, the stock price is the
highest amount someone is willing to pay for the stock, or the lowest amount that it
can be bought for. Share price is determined on the basis of various factors. Empirical
studies have demonstrated that prices do not completely follow random walks. Low
serial correlations (around 0.05) exist in the short term, and slightly stronger
correlations over the longer term. Their sign and the strength depend on a variety of
factors.

The word impact refers to the the action of one object coming forcibly into contact
with another. The most of the related studies reported that Stock price is affected by
the payout of dividend, Earning per share and few reported that size also have a

3
impact on the stock price of the bank. Similarly, in this study, Stock price is a
dependent variable which determines the bank‟s performance in stock market
whereas EPS, Dividend per share & Size are independent variables. This study shows
the impact of EPS,DPS & Size on stock price of Nepalese selected commercial banks.
1.5.2 Review of Related Studies
Earning per share, Dividend per share & size have various impact on the stock price
of the commercial bank. Therefore various researchers have examined the impact of
EPS,DPS & size on the stock price of a commercial bank. The major studies related to
the issue of credit risk and bank performance have reviewed as follows:

Ebrahimi and Chadegani (2011), studied the relationship between Earning, Dividend,
Stock Price and Stock Return. They used cross-section, pooled data and panel data
regression models for testing. They investigated the effect of earning, dividend and
stock price on stock return. In earlier years the effect of dividend was significant but
in later years there was not any significant relationship between dividend and stock
return. The results showed that only earning has effect on stock return and there is a
significant relationship between EPS to stock price ratio and stock return.

Hashemijoo, Ardekari, and Younasi (2012) has analysed the impact of dividend policy
on the share price volatility. The impact of two main measurement of dividend policy
i.e dividend yield and dividend payout on stock price volatility are examined by
applying multiple regression and found significant negative relationship. They also
observed the significant negative impact of firm size on stock price volatility. Further
it has been observed that dividend yield and size are the most important indicators of
stock price volatility.

Mehr-un-nisa and Nishat (2012) has investigated the impact of financial fundamental
and macroeconomic factor on the stock price and found that previous year’s stock
price, company size and previous year EPS have significant impact on current year’s
stock price. They also revealed that macroeconomic factors like real GDP growth,

4
ROI and financial development have strong impact on stock price. Further they
revealed that there is no significant impact of market to book value, share turnover
ratio and inflation rate on stock price.

Bhatt and Sumangala (2012) has investigated the impact of EPS on market value of
equity share. By applying correlation coefficient they found the positive relationship
between EPS and market value of equity share and by applying regression analysis
they found the significant impact of EPS on the market value of equity shares. They
also stated that EPS is only one of the factors affecting market value of equity shares,
there are other factors also which affect the market value of equity shares such as
company related factors, and industry related factors and economic factors.

Malhotra and Tondon (2013) has examined the factors affecting stock price on NSE
100 companies. They use linear regression model and found that there is a significant
positive relationship of firm’s book value, EPS and Price Earning Ratio with firm’s
stock price, Whereas there is significant inverse relationship of dividend yield with
market price of firm’s stock.

Almumani (2014) has examined the determinants of Equity Share Price. They used
regression and correlation analysis and found that out of six factors affecting the share
price, 4 factors which are EPS, Book value per share, Price Earning Ratio and Size
have significant impact on share price whereas other two factors which are DPS,
Dividend Payout have no significant impact on the share price.

Islam, Khan, Choudhury, and Adnan (2014) has investigated how the EPS affects
share price and firm’s value. They revealed that as EPS increases the share price also
increases but not that much. EPS is only one of the factor affecting share price, there
are also other factors affecting share price such as macroeconomic factor,
microeconomic factor on the company, director’s role and company’s factor and other

5
factors. The researcher has suggested that investor should keep in mind above said
factors along with EPS while investing in capital market.

Adebisi and Lawal (2015) has investigated the factors affecting firm’s equity share
price. They identified that the DPS, EPS, book value per share, dividend payout, price
earning ratio and size of the firm has the major impact on the firm’s equity share
price.

Challa, and Chalam (2015) has investigated the impact of book value, DPS, EPS, Size
of the firm, Dividend per share, dividend yield, Return on net worth, Price Earning
ratio on the equity price of listed Companies in BSE. By employing multiple
regression analysis they found that book value and return on net worth have
significant positive relationship with market share price.

6
1.5.3 Concluding Remarks
The purpose of this study is to see what new contribution can be made and receive
some ideas, knowledge, and suggestions in relation to the impact of credit risk on the
performance of commercial banks. However, the previous studies cannot be ignored
because they provide the foundation for the present study. This study is continuity in
research and is ensured by linking the present study with the past research studies. It
is found that many scholars haven’t considered size as one of the main determinants
of stock price. In this study, we examine whether or not size establishes itself as a core
determinant of Stock price and provide an impact on stock price. Therefore, to fill this
gap in the literature and shed light, the present study attempts to analyze the impact
of, EPS,DPS and Size with special reference to the selected bank in Nepal. The main
contribution of this study is to make a financial comparison based on DPS, EPS and
size to determine the market price of the share. Like any other study, this study is also
not without its limitations.

1.5.4 Conceptual Framework

The conceptual frame work is designed to understand the factor that may affect the
market price per share. The extant literature available strongly supports the movement
of stock price as a consequence of firm specific factors. In view of theory and major
empirical evidences, it is expected that the market price per share of commercial
banks may be influenced by dividend per share, dividend yield, earnings per share,
price earnings ratio and size of the bank. The conceptual framework developed to test
the effect of these variables on the market price per share of listed commercial banks
of Nepal in this study is portrayed in Figure 1.

7
Figure-1. Conceptual frame work

The independent variables ie Earning per share (EPS), Dividend per share (DPS)
&Size are assumed to affect the dependent variable, share price of commercial banks.
The independent variables are selected depending upon prior theoretical and empirical
grounds.

1.6 Research Methods

With a view to attaining the overall objectives of the research, the research has been
carried out following the systematic methodology. The section provides a description
of the type of data and with the description of methods and procedures for analyzing
data.

1.6.1 Research Design

The research study is constructed through descriptive as well as explanatory designs.
The explanatory design considers reviewing of past journals, annual reports as well as
related schedules and consultation to suffice the qualitative and quantitative
information regarding the stated objectives. Concurrently, descriptive design
comprises a unique approach to this issue by using the multivariate linear regression
model to identify the factors that influenced the dividend policy of the Nepalese
commercial banks to test the theoretical relation between dividend per share with

8
variables namely Interest ratio, Earning per share, P/E ratio and their analysis and the
practices of these banks.

1.6.2 Data Collection Procedure

This study is based on secondary data. The basic data have been collected from the
annual reports of the selected banks. Other supplementary data and information have
been obtained from various sources such as Nepal Rastra Bank, Nepal stock exchange
limited, previous dissertation, research publication, and relevant websites.

1.7 Population and Sample

There has been a remarkable development in the banking sector in Nepal. There are
altogether 28 commercial banks operating in the country. The list of banks operating
in the country is provided in the appendices.
It will be lengthy, time-consuming and vague while taking all of these institutions into
consideration. The sampling method has been selected to select the banks to study for
this research. The banks that have been sampled for the study are Machhapuchchhre
Bank Limited, Nabil bank limited, Siddhartha bank limited and Standard chartered
bank Nepal Limited.

2) Earning Per Share (EPS): Earnings per share (EPS) is the portion of a company's
profit allocated to each outstanding share of common stock. It reflects the earning
power of a company. It makes easy to compare past and present EPS of the company
and compare with competitions.

1.7.1 The Variables and Hypotheses

Market Price
The present study seeks to test the factors influencing stock prices of commercial
banks in Nepalese stock market. As observed by researcher such as Malhotra
(1987),Piotroski and Roulstone (2004), and Zakir and Khanna (1982), stock price can
change minute by minute due to changes in the buying and selling pressure. Due to
these changes it becomes difficult to decide as to which market price should be
regressed as a measure of dependent variable. In the present study closing price of

9
stock at the end of the financial year of the bank has been taken to represent market
price. The market price is used as dependent variable in the present study.
Dividend Per Share
The dividend per share provides an idea of how well earnings support the dividend
payments. Dhanani (2005) found that dividend policy serves to enhance corporate
market value. In fact, more mature companies tend to have a higher payout ratio.
Conversely, it means that there is an inverse relation between payout ratio and share
price changes. The hypothesis that could be tested, based on these findings is: H1:
There is a negative relationship between dividend per share and share price.

Earnings Per Share

Earnings per share serve as an indicator of a company's profitability. The increasing
earnings per share generally results in high market price. According to Ball and
Brown (1968), Baskin (1989), Malhotra and Tandon (2013), Almumani (2014), Jatoi,
Shabir, Hamad, Iqbal and Muhammad (2014) the earnings per share has a positive
relationship with market price, that is, higher the earning per share, higher will the
market price be. Based on theory and these empirical results, another hypothesis to be
tested in this study is:
H2: There is a positive relationship between earnings per share and share

Size
Size is an important financial measure used to represent the volume of the bank.The
size of the firm can be measured in many ways, for example, through turnover, paidup
capital, capital employed, total assets, net sales, market capitalization, etc. In the
present study bank size is measured by total asset scaled in natural logarithm.
According to Almumani (2014) size is negatively related to market price of equities.
However, large bank generally offer better banking services opportunities to
customers and borrower than the smaller ones. The banks by virtue of their higher size
generally occupy a stronger and dominant position in the stock market. The shares of
large banks are actively traded in the stock exchange; they provide more liquidity and
marketability to the investors. Thus, the temptation to buy shares of large banks leads
to increase its market price of share. Chandra (1981) indicated that size has significant

10
positive impact on market price of share. The hypothesis derived from these findings
and tested in this study is:
H3: There is a positive relationship between the bank size and share price.
1.7.2 Data Analysis Tools
Statistical tools are used to analyze the relationship between two or more variables
and to find how these variables are related. In this study, following statistical tools are
used.

Mean
Arithmetic mean is an average of a given set of data this is divided by the number of
observation/ years. The arithmetic mean (AM) is denoted by X:

Standard Deviation
Standard deviation is the measure of dispersion of a set of data from its mean. It
measures the absolute variability of a distribution; the higher the dispersion or
variability, the greater is the standard deviation and greater will be the magnitude of
the deviation of the value from their mean.

Coefficient of variation (C.V)

A coefficient of variation (CV) is a statistical measure of the dispersion of data points
in a data series around the mean. The coefficient of variation represents the ratio of
the standard 21

Coefficient of correlation
Correlation is a statistical tool design to measure the degree of association between
two or more variables. In another word, if the changes in one variable affect the
changes in another variable, then the variable is said to be co-related when it is used to
measure the relationship between two variables, then it is called simple correlation.
The coefficient of correlation measures the degree of relationship between to sets of
figures. Among the various methods of finding out the coefficient of correlation, Karl
Pearson's method is applied in the study. The result of coefficient of correlation

11
always lies between +1 and -1. The formula for the calculation of the coefficient of
correlation between X and Y is given below.
The interpretation of calculated value of correlation coefficient by following way
1. If r = 0, then there is no correlation between variables

2. If r > 0, then there is positive correlation between variables

3. If r < 0, then there is negative relation between variables

4. If r = +1, then there is perfect positive correlation

5. If r = -1, then there is perfect negative correlation

Regression analysis
The regression equation to be estimated has therefore been specified as
MPit= β0+β1DPSit+β2EPSit+β3Sizeit+εit Where,
DPSit represents Dividend Per Share of bank I in year t;
EPSit represents Earning Per Share of Bank i in year t;
MPit represents Market Price of Bank i in year t
Sizeit represents Size of Bank I in year t β0 is
the intercept (constant);

1.8 Limitation of the Study

The following are some of the limitations of the study:

1) The output of proposed study cannot be claimed as errorless due to the different
limitation of methodological aspects. The study is entirely based on secondary data
of commercial banks.

2) This study is based on ten-year data starting from 2006/07to 2017/18 A.D

12
3) Only four commercial banks have been taken for the study.

4) Moreover, the reliability of tools, lack of research experiences and lack of data are
the other limitations of this study.

5) Another limitation is the consideration of only three variables and not a large
observation. Therefore, the precondition of regression may not be fulfilled.

1.9 Organization of the Study

This project report is prepared for the partial fulfillment of the requirements for the
degree of Bachelor of Business Administration. In this report whole chapter is
classified into the three parts.

Chapter I: Introduction section includes context of the study, statement of the

problem, objective of the study, significance of the study, literature review, Research
Methodology, limitation of the study and Organization of the study .Chapter II: Data
presentation and analysis section includes organization profile, Data analysis and
major finding of the study. Chapter III: Conclusion and Action Implications.

Chapter-II

Data Presentation and Analysis

This chapter deals with the data presentation and Analysis. Data for Analysis can be
obtained from the different sources and they can be presented as tables or charts like
bar diagram, graphs etc. the methods of data presentation and analysis are used to
analyze the given data and to present them in very finest manner and let the data to

13
present for drawing inferences. The data collected from the concerned Samples
Banks, NRB directives and from various other sources like libraries, booklets,
published reports, journals, internet website are organized and classified for analysis.

2.1 Organization Profile

2.1.1 Introduction to NABIL (Nabil Bank Limited)

Nabil Bank Limited is the nation’s first private sector bank, commencing its business
since July 1984. Nabil was incorporated with the objective of extending international
standard modern banking services to various sectors of the society. Pursuing its
objective, Nabil provides a full range of commercial banking services through its 67
points of representation. In addition to this, Nabil has presence through over 1500
Nabil Remit agents throughout the nation.

Nabil, as a pioneer in introducing many innovative products and marketing concepts

in the domestic banking sector, represents a milestone in the banking history of Nepal
as it started an era of modern banking with customer satisfaction measured as a focal
objective while doing business. Operations of the bank including day-to-day
operations and risk management are managed by highly qualified and experienced
management team. Bank is fully equipped with modern technology which includes
international standard banking software that supports the E-channels and
Etransactions.

2.1.2 Introduction to SBL (Siddhartha Bank Limited)

Siddhartha Bank Limited (SBL), established in 2002 and promoted by prominent
personalities of Nepal, today stands as one of the consistently growing banks in
Nepal. While the promoters come from a wide range of sectors, they possess immense
business acumen and share their valuable experiences towards the betterment of the
Bank.

14
Within a short span of time, Siddhartha Bank has been able come up with a wide
range of products and services that best suits its clientele. Siddhartha Bank has been
posting growth in its portfolio size and profitability consistently since the beginning
of its operations. The management of the Bank has been thoroughly professional.

Siddhartha Bank has been able to gain significant trust of the customers and all other
stakeholders to become one of the most promising commercial banks in the country in
less than 15 years of its operation. The Bank is fully committed towards customer
satisfaction. The range and scope of modern banking products and services the Bank
has been providing is an example to its commitment towards customer satisfaction. It
is this commitment that has helped the Bank register quantum growth every year. And
the Bank is confident and hopeful that it will be able to retain this trust and move even
further towards its mission of becoming one of the leading banks of the industry.

2.1.3 Introduction to SCB (Standard chartered Bank limited)

Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987
when it was initially registered as a joint-venture operation. Today the Bank is an
integral part of 26 Standard Chartered Group having an ownership of 70.21% in the
company with 29.79% shares owned by the Nepalese public. The Bank enjoys the
status of the largest international bank currently operating in Nepal.

Standard Chartered has a history of over 150 years in banking and operates in many of
the world's fastest-growing markets with an extensive global network of over 1700
branches (including subsidiaries, associates and joint ventures) in over 70 countries in
the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom
and the Americas. As one of the world's most international banks, Standard Chartered
employs almost 87,000 people, representing over 115 nationalities, worldwide. This
diversity lies at the heart of the Bank's values and supports the Bank's growth as the
world increasingly becomes one market. With 15 points of representation, 23 ATMs
across the country and with more than 450 local staff, Standard Chartered Bank Nepal
Ltd. is in a position to serve its clients and customers through an extensive domestic

15
network. In addition, the global network of Standard Chartered Group gives the Bank
a unique opportunity to provide truly international banking services in Nepal.

The Bank has been the pioneer in introducing 'customer focused' products and
services in the country and aspires to continue to be a leader in introducing new
products in delivering superior services. It is the first Bank in Nepal that has
implemented the Anti-Money Laundering policy and applied the 'Know Your
Customer' procedure on all the customer accounts.

2.1.4 Introduction to MBL (Machhapuchchhre Bank limited)

Machhapuchchhre Bank Limited was registered in 1998 as the first regional
commercial bank from the western region of Nepal and started its banking operations
from Pokhara since year 2000.

The Bank facilitates its customer needs by delivering the best of services in
combination with the latest state of the art technologies and prudent international
practices. The Bank is the pioneer in introducing the latest technology in the banking
industry in the country. It is the first bank to introduce centralized banking software,
globus banking system of Temenos NV, Switzerland. The bank provides modern
banking facilities such as Any Branch Banking, Internet Banking, Mobile Banking,
Safe Deposit Locker facilities, Utility Bill payment (Telephone & Mobile), ATM
(VISA Debit Cards ) to its valued customers. Besides these, the Bank is providing 365
Days Banking and Evening Counter services to the customers through many of its
offices.

The Bank has been promoted by highly renowned Non-Residential Nepalese,

prominent business man and industrialists with a vision and dedication to provide the
best financial products and services in the most efficient and professional manner.

16
 2.2 Data presentation

2.2.1 Data presentation of Stock price

Table 2. 1 Data analysis of Stock Price of MBL, NABIL, SBL and SCB
Year MBL SBL NABIL SCB
2006/07 620 775 5050 5900
2007/08 1275 1090 5275 6830
2008/09 420 1000 4899 6010
2009/10 282 444 2384 3279
2010/11 133 270 1252 1800
2011/12 107 345 1355 1799
2012/13 203 300 1815 1820
2013/14 576 810 2535 2799
2014/15 564 678 1910 1943
2015/16 680 869 2344 3600
2016/17 360 485 1523 2295
2017/18 209 300 921 755

Mean 452.4167 613.8333 2605.25 3235.833

SD 325.5316 292.7083 1566.642 1974.357
Variance 105970.8 85678.15 2454367 3898085

Source: Annual reports of MBL, NABIL, SBL & SCB

As depicted in table 2.1 the average stock price of the standard chartered bank is the
highest among MBL, NABIL and SBL. SCB limited has an average MPS of Rs 3236
in last ten years .The standard deviation of stock price shows the fluctuation of the
values from the mean. S.D of SCB is 1974 and is the highest among the rest of the
sample. The Variance measures how far a data set is spread out. Variance of SCB is
the highest among the rest of the sample. Figure 2.1 gives the glimpse of the trend of
Stock Price of MBL,NABIL, SBL and SCB

17
 Figure 2. 1 Trend of Stock Price of MBL, NABIL, SBL and SCB

The above trend chart shows the stock price behavior of selected banks in last 10
years. SCB has the highest Market Price fluctuation among the other three banks.
Siddhartha bank and Machhapuchhre bank has consistency to some extent.

2.1.2 Data presentation of EPS

Table 2. 2 Data analysis of EPS of MBL, NABIL, SBL and SCB

Year MBS SBL NABIL SCB
2006/07 9.02 15.88 137.08 167.37
2007/08 10.35 17.29 115.86 131.92
2008/09 8.33 22.89 113.44 109.99
2009/10 4.96 21.99 83.81 77.65
2010/11 0.55 19.82 70.67 69.51
2011/12 1.54 20.41 83.57 72.6
2012/13 5.98 29.8 91.05 65.7
2013/14 18.34 38.63 76.12 65.47
2014/15 22.2 37.7 57.24 57.38
2015/16 25.4 41.53 59.27 45.96
2016/17 24 26.6 58.41 35.49

18
2017/18 15.81 26.45 49.51 27.33

MEAN 12.20667 26.5825 83.0025 77.1975

SD 8.703119 8.64444 27.21815 40.61565
VARIANCE 75.74428 74.72635 740.8277 1649.631

Source: Annual reports of NABIL, SBL, SCB

As depicted in table 2.2 the average EPS of NABIL is the highest among the four banks.
NABIL has an average of Rs83.0025 of EPS yearly. The standard deviation of EPS shows
the fluctuation of the values from the mean. S.D of SCB is 40.61percent and is the highest
among the rest of the sample. The Variance measures how far a data set is spread out.
Variance of SCB is the highest among the rest of the sample.Figure 2.2 gives the
glimpse of the trend of EPS of MBL, NABIL, SBL and SCB

Figure 2. 2 Trend chart of EPS of MBL,NABIL, SBL and SCB

The above trend chart shows the EPS behavior of selected banks in last 10 years. SCB
has the huge fluctuation in EPS among the other three banks. The EPS of NABIL &
SCB are in declining trend every year. The highest EPS of SCB was in fiscal year
2006/07 which was Rs.167.

19
2.1.3 Data presentation of DPS

Table 2. 3 Data analysis of DPS of MBL, NABIL, SBL and SCB

Year MBL SBL NABIL SCB
2006/07 0 15.79 140 130
2007/08 21.05 15.79 100 130
2008/09 0 15.79 85 100
2009/10 10 10.03 70 70
2010/11 0 15.79 30 50
2011/12 0 8.42 60 60
2012/13 0 22.11 65 50
2013/14 12.63 23.16 65 51.5
2014/15 16.84 21.05 36.84 44.21
2015/16 21.84 39 45 35.09
2016/17 15 14 48 105.26
2017/18 10 13.16 34 17.5

Mean 8.946667 17.84083 64.90333 70.29667

SD 2.504052 2.315585 9.115369 10.73953
Variance 75.24332 64.34323 997.0794 1384.049

Source: Annual reports of MBL,NABIL, SBL, SCB

As depicted in table 2.3 the average of the standard chartered bank is the highest
among MBL,NABIL and SBL. SCB limited has an average of 70.29 percent of
yearly. The standard deviation of DPS shows the fluctuation of the values from the
mean. S.D of SBL is 10.7 percent and is the highest among the rest of the sample. The
Variance measures how far a data set is spread out. Variance of SCB is the highest
among the rest of the sample. Figure 2.3 gives the glimpse of the trend of DPS of
MBL, NABIL, SBL and SCB

20
 Figure 2. 3 Trend chart of DPS of MBL, NABIL, SBL and SCB

The above trend chart shows the DPS behavior of selected banks in last 10 years.
According to the trend chart SCB & NABIL had high amount of divivend payout
whereas SBL and MBL had low dividend payout as compared to NABIL and SCB.

2.1.4 Data presentation of Size

Table 2. 4 Data analysis of size of MBL, NABIL, SBL and SCB (In Millions)
Year MBS SBL NABIL SCB
2006/07 1249.85 7954.66 2725.33 2859.66
2007/08 1241 1166.83 3713.27 3333.57
2008/09 1749.07 1788.17 4386.73 4058.46
2009/10 2067.88 2280.24 5215.16 4021.33
2010/11 1960.58 2440.58 5814.14 4381.05
2011/12 2435.73 2962.87 6320.03 4167.7
2012/13 3029.62 2280.24 7324.14 4563.11
2013/14 4072.39 3365.38 9029.29 5332.41
2014/15 4875.35 4027.7 11869.6 6505.9
2015/16 5969.3 7612.49 12730.01 6518.5

21
2016/17 6912.75 9158.61 14401.78 7835.6
2017/18 8478.76 11986.92 16097.8 8403.15

Mean 3670.19 4752.0575 8302.27333 5165.03667

SD 693.0976 1011.48561 1287.86081 510.854287
Variance 5764611 12277237.7 19903025.5 3131665.24

Source: Annual reports of MBL,NABIL, SBL, SCB

As depicted in table 2.4 the average size of the NABIL bank is the highest among
MBL,SCB and SBL. NABIL has an average of 8302.2 Crores of total assets in last 10
years. The standard deviation of Size shows the fluctuation of the values from the
mean. S.D of NABIL is 1287.86081 and is the highest among the rest of the sample.
The Variance measures how far a data set is spread out. Variance of NABIL is the
highest among the rest of the sample.Figure 2.4 gives the glimpse of the trend of Size
of MBL, NABIL, SBL and SCB

Figure 2. 4 Trend chart of Size of MBL, NABIL, SBL and SCB

The above trend chart shows the Size of selected banks in last 10 years. According to
the above chart NABIL Bank has huge growth in size in last 10 years as compared to
the other banks. The size of each bank is in growing trend.

22
 2.2 Descriptive Statistics of Study Variables
In this section mean, standard deviation, kurtosis, skewness and min-max of variables
(DPS, EPS, MPS & Size)is analyzed. On the basis of data, combine analysis has been
done.

Table 2. 5 Descriptive Statistics of Study Variables

Variables Stock price EPS DPS TA
Mean 1726.833 49.74729 40.49688 5472.389
SD 1743.83 39.57599 36.79641 3555.864
Sample Variance 3040944 1566.259 1353.975 12644171
Kurtosis 1.472436 0.624183 0.720453 1.068459
Skewness 1.507936 1.03812 1.181878 1.176762
Range 6723 166.82 140 14930.97
Minimum 107 0.55 0 1166.83
Maximum 6830 167.37 140 16097.8

Table 2.5 depicts that the average dividend per share of Nepalese commercial bank is
40.49%.The standard deviation is 35.79% and it represents variation in DPS. The
kurtosis is a statistical measure that is used to describe the distribution, of observed
data around the mean sometimes referred to as the volatility of volatility. The kurtosis
of 0.72 represents that the distribution is platykurtic. Platykurtic describes a statistical
distribution with thinner tails than a normal distribution. Skewness is asymmetry in a
statistical distribution, in which the curve appears distorted or skewed either to the left
or to the right. Skewness can be quantified and define the extent to which a
distribution differs from a normal distribution. The skewness of 1.18 represents that
the distribution is positively.. The maximum and minimum represents the highest and
lowest value of the variable of the selected sample. The maximum DPS was 140%
and minimum DPS was 0%

Likewise, the EPS represents the profitability of the firm. EPS has a positive
relationship with the DPS. Higher profit represents higher dividend payouts. The

23
average EPS is Rs.49.74.It’s S.D. is 39.57. Kurtosis is 0.62 which means that the
distribution is platykurtic and skewness is 1.0382 which means that the distribution is
positively skewed. Maximum EPS is 167.37 and the minimum EPS is 0.55.

Total asset is a financial measure used to represent the volume of the bank.The
average total assets of selected bank is 5472.389 crores. Standard deviation is
3555.864.The kurtosis is a statistical measure that is used to describe the distribution,
of observed data around the mean sometimes referred to as the volatility of volatility.
The kurtosis of 1.068459 represents that the distribution is platykurtic. Platykurtic
describes a statistical distribution with thinner tails than a normal distribution. The
maximum total asset is 16097.8 crores whereas the minimum TA is 1166.83.

The market value per share or fair market value of a stock is the price that a stock can
be readily bought or sold in the current market place.The average stock price of
selected bank is Rs 1726.83.SD of MPS is 1743. The kurtosis is a statistical measure
that is used to describe the distribution, of observed data around the mean sometimes
referred to as the volatility of volatility. The kurtosis of 1.472436 represents that the
data is platykurtic. Stock price is positively skewed. The maximum stock price is
6830 & minimum stock price is 107.

2.3 Result from Correlation Analysis

One of the most commonly used measurements, in order to test the relationship
between a number of variables, is correlation coefficient (Keller, 2005, p.602).

24
Table 2. 6 Correlation coefficients of Selected Bank
Stock Price EPS DPS TA in Crores
Stock Price 1
EPS 0.892927 1

DPS 0.908013 0.924344 1

TA in Crores -0.06115 0.064956 0.036584 1

Source : Annual report of selected bank

Correlation coefficients vary between -1 and 1. Negative values indicate negative

correlation, and positive values indicate positive correlations. Values close to zero
reflect the absence of correlation.

The above table shows the correlation between Stock Price, EPS, DPS & Size. The
table depicts that there is a negative relation between TA and Stock Price. Here
relation between Size & Stock Price is -0.06. A higher TA indicates a declining stock
price, a decreased total assets also have the same consequences in the form of
declining stock price.

Other variables EPS & DPS is positively correlated with Stock price i.e 0.8929 &
0.9080 respectively so therefore the increase in EPS & DPS results into the increment
of stock price and vice-versa. Also Total asset is positively correlated with DPS &
EPS.

2.4 Result from Regression analysis

Table 2. 7 Regression of selected bank

Coefficients Standard Error t Stat P-value
Intercept 99.53642 216.5686 0.459607 0.648061
EPS 17.23115 6.639587 2.595215 0.012797
DPS 26.08621 7.130831 3.658228 0.000676
TA in Crores -0.05232 0.028215 -1.85433 0.070401

25
R2=0.85552, Adjusted R2 = 0.845669, Standard error= 685.0643, F-Stat= 86.8465, Sig-F=
1.64E-18,

R2 is the coefficient of determination. It tells us how many points fall on the

regression line. The R2 in the figure is 0.85552 which means that 85 percent of the
variation of y-values around the mean is explained by the x-values. The adjusted
Rsquared compares the descriptive power of regression models that include diverse
numbers of predictors. The adjusted R2 in the table is 84.5 %. The standard error of
the regression is 685.06. It is an estimate of the standard deviation of the error μ. This
is not the same as the standard error in descriptive statistics. The standard error of the
regression is the precision that the regression coefficient is measured; if the coefficient
is large compared to the standard error, then the coefficient is probably different from
0. The statistic in the table shows that there is a perfect model fit with an F statistics of
86.84%. This means that the model specification is correct and that the selected
independent variables are determinants of Dividend per share. The selected variable is
affected by the independent variables. The number of observations taken in the
sample was 48.

The regression result shows the positive intercept 99.53.The intercept is known as
constant. The size of the coefficient for independent variable gives the size of the
effect on the dependent variable. The sign on the coefficient (positive or negative)
gives the direction of the effect.

2.5 Findings and Discussion

Earning Per Share, Dividend per share & Size are some of the factors that influence
the Stock price of commercial banks in Nepal. The objective of the study was to
assess the impact of these factors on stock price of Nepalese commercial banks.

The major findings of the research from the above presentation and analysis have
been highlighted below.

26
1) There is a negative relationship between Size & Stock Price. Size represents
the Total Assets of the banks. Therefore, when the size is higher the stock price is
lower and vice versa.

2) There is a positive relationship between EPS & Stock price. EPS is the
indication of profitability of the bank. Therefore, when the EPS of the bank is higher,
the stock price is also higher and vice versa

3) There is a positive relationship between DPS & Stock Price. Therefore, when
the DP ratio of the bank is higher the stock price is also higher & vice versa.

4) The regression analysis showed that there is a significant relationship between

the dependent and dependent variables used in the study.

5) The trend chart variables showed that there is irregular pattern in the dividend
distribution of the selected banks in the study. The trend chart of EPS showed there is
a similarity in trends between NABIL and SCB. The trend chart of Size showed that
NABIL bank had the highest number of Total assets among the other selected
banks.The trend chart of Stock price shows that stock price of banks are in declining
trend in recent years.

Chapter III

Conclusion and Action Implication

3.1 Conclusion
The study of the determinants of equity share prices has been a subject of great
interest these days. Moreover, it is a subject of immense curiosity especially a banking

27
sector to identify the factors that influence share prices. The shares of commercial
banks offer the investment opportunities to Nepalese investors because these shares
are more frequently traded in the market than as compared to others in Nepalese
context. Specifically, this study examined the effects of dividend per share, Earning
per share, and size on the share price of banks listed on Nepal stock exchange
Limited.

The findings of the study over the period 2006-2018 revealed that earning per share
and Dividend per share have the significant positive association with share price while
size showed the significant inverse association with the share price of the banks. The
study concludes that dividend per share & earnings per share and are the major
determinants of share price of Nepalese commercial banks.

The results of this study uncovered new evidence in Nepalese perspective, which are
considered to be valuable to the market participants. Thus, findings of the this study
seems to be particularly useful for equity investors and fund managers as they can
watch out for these significant factors while estimating stock returns and predicting
share prices.

3.2 Action implication

This study is focused on the influence of some of the factors (EPS, DPS & Size) on
Stock price of commercial banks on Nepal. From the above data analysis, it is
concluded that the above-mentioned factors influence the Stock Price to some extent.
However, the above-mentioned factors are not the sole determinants of Stock Price.
This study has taken only three of the possible factors which were believed to have
some influence on the Stock price. There are many other factors which are believed to
have the same or greater influence on Stock price.

The results and the analysis have revealed some additional questions which need to be
answered in future studies. More factors than the ones included in the research should

28
have an impact on the Stock price. It would, therefore, be interesting to conduct a
similar study with different factors that may provide an impact on Stock price.

A time period of tewn years has been used in this study and for future research we
recommend to use a longer time period. It would be interesting to see whether the
results from this study are applicable if a study is conducted over a longer period of
time or during another time period.

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Appendices

Appendix-I

Stock price, DPS, EPS & Size of MBL

Year Bank Stock Price EPS DPS TA in Crores
2006/07 MBL 620 9.02 0 1249.85
2007/08 MBL 1275 10.35 21.05 1241
2008/09 MBL 420 8.33 0 1749.07
2009/10 MBL 282 4.96 10 2067.88
2010/11 MBL 133 0.55 0 1960.58
2011/12 MBL 107 1.54 0 2435.73
2012/13 MBL 203 5.98 0 3029.62
2013/14 MBL 576 18.34 12.63 4072.39
2014/15 MBL 564 22.2 16.84 4875.35
2015/16 MBL 680 25.4 21.84 5969.3
2016/17 MBL 360 24 15 6912.75
2017/18 MBL 209 15.81 10 8478.76

Source: Annual reports

Appendix-II

Stock price, DPS, EPS & Size of SBL

Year Bank Stock Price EPS DPS TA in Crores
2006/07 SBL 775 15.88 15.79 7954.66
2007/08 SBL 1090 17.29 15.79 1166.83
2008/09 SBL 1000 22.89 15.79 1788.17
2009/10 SBL 444 21.99 10.03 2280.24

32
2010/11 SBL 270 19.82 15.79 2440.58
2011/12 SBL 345 20.41 8.42 2962.87
2012/13 SBL 300 29.8 22.11 2280.24
2013/14 SBL 810 38.63 23.16 3365.38
2014/15 SBL 678 37.7 21.05 4027.7
2015/16 SBL 869 41.53 39 7612.49
2016/17 SBL 485 26.6 14 9158.61
2017/18 SBL 300 26.45 13.16 11986.92

Source: Annual reports

Appendix-III

Stock price, DPS, EPS & Size of NABIL

Year Bank Stock Price EPS DPS TA in Crores
2006/07 NABIL 5050 137.08 140 2725.33
2007/08 NABIL 5275 115.86 100 3713.27
2008/09 NABIL 4899 113.44 85 4386.73
2009/10 NABIL 2384 83.81 70 5215.16
2010/11 NABIL 1252 70.67 30 5814.14
2011/12 NABIL 1355 83.57 60 6320.03
2012/13 NABIL 1815 91.05 65 7324.14
2013/14 NABIL 2535 76.12 65 9029.29
2014/15 NABIL 1910 57.24 36.84 11869.6
2015/16 NABIL 2344 59.27 45 12730.01
2016/17 NABIL 1523 58.41 48 14401.78
2017/18 NABIL 921 49.51 34 16097.8

Source: Annual reports

Appendix-IV

Stock price, DPS, EPS & Size of SCB

33
Year Bank Stock Price EPS DPS TA in Crores
2006/07 SCB 5900 167.37 130 2859.66
2007/08 SCB 6830 131.92 130 3333.57
2008/09 SCB 6010 109.99 100 4058.46
2009/10 SCB 3279 77.65 70 4021.33
2010/11 SCB 1800 69.51 50 4381.05
2011/12 SCB 1799 72.6 60 4167.7
2012/13 SCB 1820 65.7 50 4563.11
2013/14 SCB 2799 65.47 51.5 5332.41
2014/15 SCB 1943 57.38 44.21 6505.9
2015/16 SCB 3600 45.96 35.09 6518.5
2016/17 SCB 2295 35.49 105.26 7835.6
2017/18 SCB 755 27.33 17.5 8403.15

Source: Annual reports

34