| Title : | Corporate payout policy and market capitalization:a case of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Anita Kumari Luitel, Author | | Publication Date: | 2018 | | Pagination: | 90p. | | Size: | GRP/Thesis | | Accompanying material: | 10/B | | Languages : | English | | Descriptors: | Corporations -Finance
Dividends
| | 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 shareholders 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 investigate the relationship between corporate dividend pay-out and market capitalization of the Nepalese commercial banks. The specific objectives are (a) to examine the structure and pattern of market price per share and market capitalization of the Nepalese commercial banks, (b) to find out the relation of dividend yield, dividend payout ratio, size, leverage, gross domestic product growth and earnings per share with market price per share in Nepalese commercial banks, (c) to analyze the relation of bank’s dividend payout ratio with market capitalization in Nepalese commercial banks and (d) to find out the most important factors of leverage and dividend yield affecting the market price per share of Nepalese commercial banks.
The study is based on descriptive and causal-comparative research designs. The descriptive research 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 126. 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 and earnings per share. These data are collected for the period 2009/10-2015/16.
The results show that market price per share and market capitalization has a positive relationship with size of the banks, dividend payout ratio, leverage, earnings per share and gross domestic product growth rate. Dividend yield has been found to have a negative relationship with market price per share and market capitalization. The results reveal that beta coefficients of size of banks, dividend payout ratio, leverage, gross domestic product growth and earnings per share are positive and significant for the overall market capitalization and market price per share of Nepalese commercial bank which implies that higher the size of banks, dividend payout ratio, leverage, gross domestic product growth and earnings per share result in higher market capitalization and market price per share of the Nepalese commercial banks. All the results are significant.
The major conclusion of the study is the corporate payout policy of Nepalese commercial banks represented mainly by dividend yield, dividend payout ratio and earnings per share has a crucial impact on the market capitalization of Nepalese commercial banks. Other than that size, leverage and GDP have also significant impact on the market capitalization of Nepalese commercial banks. More specifically, size of the banks, dividend payout ratio, leverage, gross domestic product growth and earnings per share impacts positively and significantly to the market capitalization.
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Corporate payout policy and market capitalization:a case of Nepalese commercial banks [printed text] / Anita Kumari Luitel, Author . - 2018 . - 90p. ; GRP/Thesis + 10/B. Languages : English | Descriptors: | Corporations -Finance
Dividends
| | 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 shareholders 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 investigate the relationship between corporate dividend pay-out and market capitalization of the Nepalese commercial banks. The specific objectives are (a) to examine the structure and pattern of market price per share and market capitalization of the Nepalese commercial banks, (b) to find out the relation of dividend yield, dividend payout ratio, size, leverage, gross domestic product growth and earnings per share with market price per share in Nepalese commercial banks, (c) to analyze the relation of bank’s dividend payout ratio with market capitalization in Nepalese commercial banks and (d) to find out the most important factors of leverage and dividend yield affecting the market price per share of Nepalese commercial banks.
The study is based on descriptive and causal-comparative research designs. The descriptive research 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 126. 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 and earnings per share. These data are collected for the period 2009/10-2015/16.
The results show that market price per share and market capitalization has a positive relationship with size of the banks, dividend payout ratio, leverage, earnings per share and gross domestic product growth rate. Dividend yield has been found to have a negative relationship with market price per share and market capitalization. The results reveal that beta coefficients of size of banks, dividend payout ratio, leverage, gross domestic product growth and earnings per share are positive and significant for the overall market capitalization and market price per share of Nepalese commercial bank which implies that higher the size of banks, dividend payout ratio, leverage, gross domestic product growth and earnings per share result in higher market capitalization and market price per share of the Nepalese commercial banks. All the results are significant.
The major conclusion of the study is the corporate payout policy of Nepalese commercial banks represented mainly by dividend yield, dividend payout ratio and earnings per share has a crucial impact on the market capitalization of Nepalese commercial banks. Other than that size, leverage and GDP have also significant impact on the market capitalization of Nepalese commercial banks. More specifically, size of the banks, dividend payout ratio, leverage, gross domestic product growth and earnings per share impacts positively and significantly to the market capitalization.
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