Impact of Dividend Policy on Share Price of Commercial Bank in Nepal

Baral, Raj Kumar; Pradhan, Ajay

doi:10.3126/irjms.v3i0.28039

Cited by 3 publications

(4 citation statements)

References 6 publications

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“…Pradhan (2003) found a dividend that significantly impacts share price. Baral and Pradhan (2018) discovered that earnings per share, price-earnings ratio, dividend payout ratio, and market price per share were positively and significantly correlated. Joshi (2019) created a shareprice-affecting dividend.…”

Section: Empirical Studiesmentioning

confidence: 99%

The Effects of Dividend Policy On the Price of Shares of Microfinance Companies In Developing Countries

Bahadur Budhathoki,

Khadka

2024

SEC

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The strategy of dividend policy implementation in the context of business value growth is the subject of debates in theoretical and empirical research. Dividends and retained earnings are two alternatives that investors have when deciding how to distribute their income. According to the bird-in-the-hand theory, a company’s value is maximized by paying large dividends, because investors consider the payouts less risky than capital gains, regular high dividend payments serve as an information signal to market participations about the current and future financial stability, which attracts new investors and allows attracting more external resources. Instead, according to Miller and Modigliani’s dividend irrelevancy theory, corporate value is influenced not by the division of income into dividends and retained earnings, but by investment policy and income from assets. There is a lack of research in the literature that examines the relationship between dividend payouts and stock prices in developing countries (especially in Nepal) and there is no empirical evidence that profitability can moderate this relationship. The article examines the influence of dividend yield, retention ratio and dividend payout ratio on share price both in general and directly, and indirectly-through return on assets and return on equity. The information base is data for the 2017-2021 financial years on 61 Nepalese microfinance institutions (10 of which were the direct object of the study) registered on the Nepal Stock Exchange (NEPSE), obtained from the official websites of the relevant institutions, ShareSansar and NEPSE statistics. SPSS software (PROCESS v4.3) was used for data analysis. Descriptive statistics, the correlation and regression analysis were used for the analysis. The article analyzes three types of effects: total, direct and indirect. The overall effect of dividend yield on share price is negative, the retention ratio is positive and significant, and the dividend payout ratio is negative and significant. The direct effect of the dividend yield on the stock price is negative, the retention ratio and the dividend payout ratio are positive and insignificant. The indirect effect of dividend yield and retention ratio on share price through return on assets is negative and insignificant, and through return on equity it is positive and significant. The indirect effect of the dividend payout ratio through the return on assets is positive and significant. However, the return on shareholders’ capital has a negative and insignificant effect on the share price.

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Section: Empirical Studiesmentioning

confidence: 99%

The Effects of Dividend Policy On the Price of Shares of Microfinance Companies In Developing Countries

Bahadur Budhathoki,

Khadka

2024

SEC

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“…Most of the studies (Joshi, 2012;Pradhan, & Dahal, 2016;Baral & Pradhan, 2018) in the past have been limited to studying the impact of financial ratios upon the market share price of commercial banks in Nepal. Life Insurance companies are one of the important sectors in the Nepal Stock Exchange (NEPSE), and factors that influence the market share price of this sector have not yet been studied.…”

Section: S Maskeymentioning

confidence: 99%

“…The research used data from commercial banks and concluded that DPS was the motivating factor in the Nepalese financial sector, and it had influence the market stock price. Baral and Pradhan (2018) examined the relationship of financial indicators like EPS, P/E ratio and dividend payout ratio with the share price. The study was conducted among 10 commercial banks listed in NEPSE.…”

Section: Factors Affecting Market Share Pricementioning

confidence: 99%

Specific Determinants of Share Prices: A Case Study of Listed Life Insurance Companies in Nepal Stock Exchange

Maskey

2022

J. Bus. Mgt. Res.

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Researchers have been trying to understand and establish relationship between various factors influencing the market price of stocks. Similar studies in Nepal have been limited to banking sector only. However, this paper aims to investigate the factors that affect the market share prices of life insurance companies listed in Nepal Stock Exchange (NEPSE). All the life insurance companies listed in Nepal Stock Exchange with panel data for the period 2012/13-2017/18 was taken as a sample for the study. The data was analyzed through descriptive and inferential statistics, while the hypothesis was tested using the regression coefficients based on the results of the multiple regression model in this study. The study revealed that earning per share, dividend per share, price-earnings ratio, age of the company and dividend yield are the major determinants of share price. The study concludes that dividends play a major role when Nepalese investors make investment. Further, it was revealed that dividend policy of the companies plays a major role in shaping investor decisions in Nepal.

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“…Using the data of 7 Nepalese commercial banks for the period of 2010 to 2016 Bhattarai found a significant positive impact of dividend on share price. Similarly, Baral and Pradhan (2018) has also analyzed the impact of dividend policy on stock price of Nepalese commercial banks. Baral and Pradhan has selected ten commercial bank listed on Nepal Stock Exchange for the period of 2012/13 to 2016/17.…”

Section: Introductionmentioning

confidence: 99%

Effect of Dividend on Stock Market Price: A Panel Data Approach

Shrestha

2020

Management Dynamics

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Dividend policy is major concern for investor, managers and policy makers. Proper dividend policy helps to achieve the wealth maximization goal of the firm. This study has examined the impact of dividend on stock market price of Nepalese enterprises. For this purpose 33 dividend paying companies listed on NEPSE has been selected as sample. Likewise, this study used unbalance panel data for the period of 2000/01 to 2018/19. Breusch and Pagan Lagrangian multiplier test concluded that Pooled regression model is not appropriate and Hausman test concluded that Random Effect model is not appropriate for the data used in this study. Thus, this study adopted Fixed Effect model to analyze the impact of dividend on stock market price. This study concluded that there is significant impact of dividend on stock market price of Nepalese enterprises after controlling return on equity, earnings per share and return on equity. Finally, this study concluded that cash dividend has significant negative and stock dividend has significant positive impact on stock market price of Nepalese enterprises.

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Impact of Dividend Policy on Share Price of Commercial Bank in Nepal

Cited by 3 publications

References 6 publications

The Effects of Dividend Policy On the Price of Shares of Microfinance Companies In Developing Countries

The Effects of Dividend Policy On the Price of Shares of Microfinance Companies In Developing Countries

Specific Determinants of Share Prices: A Case Study of Listed Life Insurance Companies in Nepal Stock Exchange

Effect of Dividend on Stock Market Price: A Panel Data Approach

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