| Title : | Corporate payout policy and market capitalization:a case of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Kalpana Thapa, Author | | Publication Date: | 2016 | | Pagination: | 106p. | | Size: | GRP/Thesis | | Accompanying material: | 7/B | | Languages : | English | | Descriptors: | Corporations -Finance
| | Class number: | 332.6322 | | Abstract: | Dividend is the result of a discretionary decision made by the board of directors of a firm. Generally, a firm announces dividend on the profit. Corporate dividend policy is one of the most enduring issues in modern corporate finance. The shareholders should be indifferent between amount distributed and retained in the firm (Miller and Modigliani, 1961). Firms view dividend policy very important because it determines what funds flow to investors and what funds are retained by the firm for reinvestment. Shareholders always look at the capability of the companies to initiate a dividend. Corporate dividend policy has very important role in determining the market value of the company. A group of studies has argued that corporate dividend policy leads to increase the wealth of stockholders through its influence on the firm’s stock price and hence increases firm value (e.g. Gordon, 1963; and Salih, 2010). Another group has argued that dividend payments lead to decrease the wealth of shareholders by reducing stock price, and hence decreasing firm value (Pettit, 1972). The last group has adopted the notion of irrelevance of dividend policy, i.e., for stock prices, and hence firm value is not affected by corporate dividend policy (e.g. Miller and Modigliani, 1961; Baker et al., 1985; and Farrelly et al., 1986).
The major purpose of this study is to assess the impact of corporate dividend payout on the market capitalization of Nepalese commercial banks. The specific objectives are (a) to find out the relation between the market price per share and the dividend policy of the banks, (b) to analyze the factors affecting the market price per share of Nepalese commercial banks, (c) to measure the impact of the bank’s dividend policy on market price of share, and (d) to determine whether earning per share has strong and significant impact on market price per share of Nepalese commercial banks.
This study is based on descriptive and causal-comparative research designs. The descriptive research design has been adopted to undertake fact-finding operation searching for adequate information about the impact of corporate payout policy on the market capitalization of Nepalese commercial banks. Moreover, this study also emphasizes on cause and effect relationship between dividend and other factors and the market capitalization of commercial banks in Nepalese context. This study is based on the cross sectional secondary data which are gathered from 18 commercial banks in Nepal. The total numbers of observations is 108. The main sources of data are supervision reports of NRB and various annual reports of different commercial banks along with the publications of the World Bank. The data are collected for market price per share, market capitalization per year, total assets, dividend yield, dividend payout ratio, leverage, gross domestic product growth, earnings per share and interest rate. These data are collected for the period 2009- 2014.
The results shows that market price per share and market capitalization has a positive relationship with size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share. Interest rate has been found to have a positive relationship with market capitalization but negative relationship with market price per share. The results reveal that the beta coefficients of size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share are positive and significant for the overall market capitalization of Nepalese commercial bank which implies that higher size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share result in higher market capitalization of the Nepalese commercial banks. All the results are significant. The beta coefficients for interest rate are positive for market capitalization which means that higher market interest rate leads to higher market capitalization but the result is not significant. In contrast, the beta coefficient of interest rate is negative while regressed with market price per share which signals that higher market interest rate lowers the market price of the shares of the banks and the result is significant.
The major conclusion of the study is the corporate payout policy of the Nepalese commercial banks represented mainly by dividend yield, dividend payout ratio, earnings per share has a crucial impact on the market capitalization of Nepalese commercial banks. Other than that, size, leverage, GDP and interest rates have also significant impact on the market capitalization of the Nepalese commercial banks. More specifically, size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share impacts positively and significantly to the market capitalization
|
Corporate payout policy and market capitalization:a case of Nepalese commercial banks [printed text] / Kalpana Thapa, Author . - 2016 . - 106p. ; GRP/Thesis + 7/B. Languages : English | Descriptors: | Corporations -Finance
| | Class number: | 332.6322 | | Abstract: | Dividend is the result of a discretionary decision made by the board of directors of a firm. Generally, a firm announces dividend on the profit. Corporate dividend policy is one of the most enduring issues in modern corporate finance. The shareholders should be indifferent between amount distributed and retained in the firm (Miller and Modigliani, 1961). Firms view dividend policy very important because it determines what funds flow to investors and what funds are retained by the firm for reinvestment. Shareholders always look at the capability of the companies to initiate a dividend. Corporate dividend policy has very important role in determining the market value of the company. A group of studies has argued that corporate dividend policy leads to increase the wealth of stockholders through its influence on the firm’s stock price and hence increases firm value (e.g. Gordon, 1963; and Salih, 2010). Another group has argued that dividend payments lead to decrease the wealth of shareholders by reducing stock price, and hence decreasing firm value (Pettit, 1972). The last group has adopted the notion of irrelevance of dividend policy, i.e., for stock prices, and hence firm value is not affected by corporate dividend policy (e.g. Miller and Modigliani, 1961; Baker et al., 1985; and Farrelly et al., 1986).
The major purpose of this study is to assess the impact of corporate dividend payout on the market capitalization of Nepalese commercial banks. The specific objectives are (a) to find out the relation between the market price per share and the dividend policy of the banks, (b) to analyze the factors affecting the market price per share of Nepalese commercial banks, (c) to measure the impact of the bank’s dividend policy on market price of share, and (d) to determine whether earning per share has strong and significant impact on market price per share of Nepalese commercial banks.
This study is based on descriptive and causal-comparative research designs. The descriptive research design has been adopted to undertake fact-finding operation searching for adequate information about the impact of corporate payout policy on the market capitalization of Nepalese commercial banks. Moreover, this study also emphasizes on cause and effect relationship between dividend and other factors and the market capitalization of commercial banks in Nepalese context. This study is based on the cross sectional secondary data which are gathered from 18 commercial banks in Nepal. The total numbers of observations is 108. The main sources of data are supervision reports of NRB and various annual reports of different commercial banks along with the publications of the World Bank. The data are collected for market price per share, market capitalization per year, total assets, dividend yield, dividend payout ratio, leverage, gross domestic product growth, earnings per share and interest rate. These data are collected for the period 2009- 2014.
The results shows that market price per share and market capitalization has a positive relationship with size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share. Interest rate has been found to have a positive relationship with market capitalization but negative relationship with market price per share. The results reveal that the beta coefficients of size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share are positive and significant for the overall market capitalization of Nepalese commercial bank which implies that higher size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share result in higher market capitalization of the Nepalese commercial banks. All the results are significant. The beta coefficients for interest rate are positive for market capitalization which means that higher market interest rate leads to higher market capitalization but the result is not significant. In contrast, the beta coefficient of interest rate is negative while regressed with market price per share which signals that higher market interest rate lowers the market price of the shares of the banks and the result is significant.
The major conclusion of the study is the corporate payout policy of the Nepalese commercial banks represented mainly by dividend yield, dividend payout ratio, earnings per share has a crucial impact on the market capitalization of Nepalese commercial banks. Other than that, size, leverage, GDP and interest rates have also significant impact on the market capitalization of the Nepalese commercial banks. More specifically, size of the banks, dividend yield, dividend payout ratio, leverage, gross domestic product, and earnings per share impacts positively and significantly to the market capitalization
|
|
Refine your search Apply to external sourcesCorporate payout policy and market capitalization:a case of Nepalese commercial banks / Kalpana Thapa
