| Title : | Effect of bank specific variables and macroeconomic variables on common stock returns of Nepalese Commercial Banks | | Material Type: | printed text | | Authors: | Nirmal Kunwar, Author | | Publication Date: | 2015 | | Pagination: | 81p. | | Size: | GRP/Thesis | | Accompanying material: | 6/B | | Languages : | English | | Descriptors: | Bank specific
Macroeconomics
| | Class number: | 332.632 | | Abstract: | Stock market has drawn much more attention in the academic literature. There is ongoing research on stock return but the topic is much debatable in itself. Different models have been developed to explain the relationship between risk and return on stock. There is an accepted norm in finance that bank specific variables and macroeconomic variables explain the behavior of expected stock returns. They provide a useful mechanism to raise capital fund which enhances corporate efficiency, innovation and provides a valuable source of capital for long term economic development. Most of the empirical work investigates the relationship between stock return, bank specific variables and macroeconomic variables mostly in the developed economy. However such studies are lacking in the developing economy. Therefore, this study tries to investigate the relationship between the stock return, bank specific variables and macroeconomic variables evidence from Nepalese commercial banks. Stock return is highly sensitive to market activities. Information asymmetric also play vital role for the fluctuation of stock market. For that reason, this study basically aimed at examining the empirical relationship between stock return, market price per share, bank specific variables and macroeconomic variables in context to Nepal. This study basically concentrate on the following purpose: a) to explore the effect of bank specific variables such as size measured by market capitalization, E/P ratio, leverage, NPL, BE/ME of the commercial bank of Nepal b) to identify the effect of macroeconomic variables such as RGDP, inflation and market interest rate c) to investigate the most influencing factors to explain the stock return and market price per share in Nepalese context d) to provide the suggestion based on the research finding.
This study is based on the secondary data analysis. The data of bank specific variables have been obtained from the financial statement of the sample banks recorded in the
viii
database of NEPSA and annual report of individual bank's annual report including the NRB annual report from the fiscal year 2007/08 through 2013/14. The annual data series of macroeconomic variables has been obtained from the annual report of Central bureau of statistics and ministry of finance. The major findings of this study is based on bank specific characteristics such as bank size, leverage, BE/ME, NPL, E/P ratio and macroeconomic variables such as real gross domestic product, inflation and interest rate as independent variables where stock return and market price per share as dependent variables. The study also uses descriptive statistics, correlation and stepwise regression to draw the conclusion of the study. The major conclusion of this study is that independent variables like bank size and real gross domestic product are the major determinant of common stock return in Nepalese commercial banks. Equally, bank size and Leverage are found to have dominant role on market price determination. To sum up, bank size is the major factor that determines both the stock return and market price per share of commercial banks in Nepal because larger bank has higher risk bearing capacity and better portfolio management. Better portfolio management gives regular cash inflow which will always keeps bank‟s stock return and market price maximum. Besides this, there are other extraneous factors equally important that caused stock return/market price fluctuation. Therefore, banks/investors must look after all these factors which explicitly or implicitly affect stock return/MPS to arrive at rational decision. Finally Nepalese bankers and policy maker should pay adequate attentions to analyze the factors that make variation in stock return/MPS of the commercial banks. |
Effect of bank specific variables and macroeconomic variables on common stock returns of Nepalese Commercial Banks [printed text] / Nirmal Kunwar, Author . - 2015 . - 81p. ; GRP/Thesis + 6/B. Languages : English | Descriptors: | Bank specific
Macroeconomics
| | Class number: | 332.632 | | Abstract: | Stock market has drawn much more attention in the academic literature. There is ongoing research on stock return but the topic is much debatable in itself. Different models have been developed to explain the relationship between risk and return on stock. There is an accepted norm in finance that bank specific variables and macroeconomic variables explain the behavior of expected stock returns. They provide a useful mechanism to raise capital fund which enhances corporate efficiency, innovation and provides a valuable source of capital for long term economic development. Most of the empirical work investigates the relationship between stock return, bank specific variables and macroeconomic variables mostly in the developed economy. However such studies are lacking in the developing economy. Therefore, this study tries to investigate the relationship between the stock return, bank specific variables and macroeconomic variables evidence from Nepalese commercial banks. Stock return is highly sensitive to market activities. Information asymmetric also play vital role for the fluctuation of stock market. For that reason, this study basically aimed at examining the empirical relationship between stock return, market price per share, bank specific variables and macroeconomic variables in context to Nepal. This study basically concentrate on the following purpose: a) to explore the effect of bank specific variables such as size measured by market capitalization, E/P ratio, leverage, NPL, BE/ME of the commercial bank of Nepal b) to identify the effect of macroeconomic variables such as RGDP, inflation and market interest rate c) to investigate the most influencing factors to explain the stock return and market price per share in Nepalese context d) to provide the suggestion based on the research finding.
This study is based on the secondary data analysis. The data of bank specific variables have been obtained from the financial statement of the sample banks recorded in the
viii
database of NEPSA and annual report of individual bank's annual report including the NRB annual report from the fiscal year 2007/08 through 2013/14. The annual data series of macroeconomic variables has been obtained from the annual report of Central bureau of statistics and ministry of finance. The major findings of this study is based on bank specific characteristics such as bank size, leverage, BE/ME, NPL, E/P ratio and macroeconomic variables such as real gross domestic product, inflation and interest rate as independent variables where stock return and market price per share as dependent variables. The study also uses descriptive statistics, correlation and stepwise regression to draw the conclusion of the study. The major conclusion of this study is that independent variables like bank size and real gross domestic product are the major determinant of common stock return in Nepalese commercial banks. Equally, bank size and Leverage are found to have dominant role on market price determination. To sum up, bank size is the major factor that determines both the stock return and market price per share of commercial banks in Nepal because larger bank has higher risk bearing capacity and better portfolio management. Better portfolio management gives regular cash inflow which will always keeps bank‟s stock return and market price maximum. Besides this, there are other extraneous factors equally important that caused stock return/market price fluctuation. Therefore, banks/investors must look after all these factors which explicitly or implicitly affect stock return/MPS to arrive at rational decision. Finally Nepalese bankers and policy maker should pay adequate attentions to analyze the factors that make variation in stock return/MPS of the commercial banks. |
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