| Title : | The effect of financial performance indicators on market price per share and stock return of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Manjari Shrestha, Author | | Publication Date: | 2017 | | Pagination: | 69p. | | Size: | GRP/Thesis | | Accompanying material: | 8/B | | Languages : | English | | Descriptors: | Business enterprises - Finance
| | Class number: | 338.709 | | Abstract: | Banking sector plays a significant role in channelling funds to industries and contributing towards economic and financial growth and stability. A well-established banking sector can absorb major financial crisis in the economy and can provide a plat form for strengthening then economic system of the country (Aburime, 2009). During the last two decades the banking sector has experienced worldwide major transformation in its operating environment. Both external and domestic factors have affected its structure and performance (Fungacova and Poghosyan, 2011).
Bank performance is the reflection of the way in which the resources of a bank are used in a form which enables it to achieve its objectives. Furthermore, the term bank performance means the adoption of the set of indicators which are indicative of the bank current status and the extent of its ability to achieve the desired objectives. In this study, the possible variables determining the performance of the commercial banks are identified and studied extensively. A profitable and sound banking sector is at a better point to endure adverse upsets and adds performance in the financial system (Athanasoglou et al., 2008).
The stock market plays an important role in economic development by promoting capital formation and raising economic growth through trading on securities in the market (Nisa and Nishat, 2011). The study emphasized that trading of securities in this market facilitates savers and users of capital by fund pooling, risk sharing, and transfer of wealth. Inyiama and Nwoha (2014) stated that firm’s financial performance and businesses are in turn influenced by general economic conditions, the performance of the financial markets, inflationary rates, money supply, interest rates, foreign currency exchange rates, changes in laws, regulations and policies of the central bank, capital market and other regulators as well as competitive factors on a global, federal, state and local government basis.
The main objective of the study is to examine the effect of financial performance indicators on market price per share and stock return in Nepalese commercial banks. The study is based on secondary data of 17 commercial banks with 135 observations for the period of 2007/08to 2014/15. The data for bank specific variables have been obtained from financial statements of the sample banks, recorded in the database of Nepal Stock Exchange (NEPSE) Limited and Securities Board of Nepal (SEBON).The research design adopted in this study is descriptive and causal comparative research design as it deals with analyzing the effect of financial performance indicators on market price per share and stock return of commercial banks.
The result shows that the average market price per share is highest for SCBL (Rs 3285) and lowest for SRBL (Rs.213.75). The average stock returns are highest for NBB and MBL (27.47 percent) and lowest for SCBL (-5.68 percent). the average excess returns are highest for NBB (23.11 percent) and lowest for SCBL (-10 percent). SCBL has the highest dividend per share of Rs.69.53 and NBB has the lowest i.e. Rs 5.62. The average return on assets is largest for NBB (5.45 percent) and lowest for MBL (0.6 percent). Likewise, the average return on equity is highest for NBB (43.28 percent) and lowest for KBL (6.93 percent). NBB has highest average earning price ratio of 16.03 percent whereas it is lowest for MBL i.e. 2.05 percent. The average leverage is highest for SBI (93.15 percent) and lowest for SRBL (78.86 percent). NBB has the highest book to market ratio of 48.01 percent whereas SCB has lowest i.e. 10.35 percent. Similarly, the average firm size is largest for Nabil (Rs. 24.46 billion) and lowest for SRBL (Rs. 16.81 billion).
The descriptive statistics shows that market price per share ranges from Rs.107 to Rs. 6830.00, leading to an average market price per share of Rs. 952.65 while the stock return varies from negative 72.03 percent to 204.93 percent, leading to an average stock return of 7.85 percent. While the excess return varies from negative 78.09 percent to 204.17 percent, leading to an average excess return of 3.49 percent. The average dividend per share is noticed to be Rs. 21.98 with a minimum of Rs. 0.0 and a maximum of Rs. 130. Likewise, return on assets ranges from -0.99 percent to 18.04 percent, leading to an average of 1.87 percent. Return on equity has a minimum of negative 6.14 percent and a maximum of 193.35 percent, leading to an average of 20.25 percent. Firm size ranges from Rs. 21.34 billion to Rs. 25.07 billion, leading to an average firm size to Rs. 23.10billion. The average earning price ratio is noticed to be 5.38 percent with a minimum of 0.0 percent and a maximum of 41.43 percent. Similarly, the average leverage is noticed to be 90.47 percent with a minimum of 76.70 percent and a maximum of 96.42 percent. Moreover, the average book to market ratio is noticed to be 31.05 percent with a minimum of 5.45 percent and a maximum of 121.49 percent.
The result shows that dividend per share, return on assets, return on equity, leverage and firm size are positively related to market price per share. Whereas, book to market ratio and earning price ratio are negatively related with market price per share. Dividend per share and firm size are positively related with stock return and excess return. Whereas, return on assets, return on equity, book to market ratio, earning price ratio and leverage are negatively related with stock return and excess return.
The beta coefficient for dividend per share, return on equity, leverage and firm size are positive and significant with market price per share. However, the beta coefficient for earning price ratio and book to market ratio are negative and significant with market price per share. The beta coefficients are positive and significant for dividend per share and firm size with stock return. Whereas, earning price ratio and book to market ratio have negative impact on stock return and significant at 5 percent level of significance. The beta coefficients are positive for dividend per share and firm size with excess return. However, the beta coefficient for firm size is only significant at 5 percent level of significance with excess return. The beta coefficient for earning price ratio and book to market ratio are negative with excess return. However, the beta coefficient for earning price ratio is only significant at 5 percent level of significance with excess return.
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The effect of financial performance indicators on market price per share and stock return of Nepalese commercial banks [printed text] / Manjari Shrestha, Author . - 2017 . - 69p. ; GRP/Thesis + 8/B. Languages : English | Descriptors: | Business enterprises - Finance
| | Class number: | 338.709 | | Abstract: | Banking sector plays a significant role in channelling funds to industries and contributing towards economic and financial growth and stability. A well-established banking sector can absorb major financial crisis in the economy and can provide a plat form for strengthening then economic system of the country (Aburime, 2009). During the last two decades the banking sector has experienced worldwide major transformation in its operating environment. Both external and domestic factors have affected its structure and performance (Fungacova and Poghosyan, 2011).
Bank performance is the reflection of the way in which the resources of a bank are used in a form which enables it to achieve its objectives. Furthermore, the term bank performance means the adoption of the set of indicators which are indicative of the bank current status and the extent of its ability to achieve the desired objectives. In this study, the possible variables determining the performance of the commercial banks are identified and studied extensively. A profitable and sound banking sector is at a better point to endure adverse upsets and adds performance in the financial system (Athanasoglou et al., 2008).
The stock market plays an important role in economic development by promoting capital formation and raising economic growth through trading on securities in the market (Nisa and Nishat, 2011). The study emphasized that trading of securities in this market facilitates savers and users of capital by fund pooling, risk sharing, and transfer of wealth. Inyiama and Nwoha (2014) stated that firm’s financial performance and businesses are in turn influenced by general economic conditions, the performance of the financial markets, inflationary rates, money supply, interest rates, foreign currency exchange rates, changes in laws, regulations and policies of the central bank, capital market and other regulators as well as competitive factors on a global, federal, state and local government basis.
The main objective of the study is to examine the effect of financial performance indicators on market price per share and stock return in Nepalese commercial banks. The study is based on secondary data of 17 commercial banks with 135 observations for the period of 2007/08to 2014/15. The data for bank specific variables have been obtained from financial statements of the sample banks, recorded in the database of Nepal Stock Exchange (NEPSE) Limited and Securities Board of Nepal (SEBON).The research design adopted in this study is descriptive and causal comparative research design as it deals with analyzing the effect of financial performance indicators on market price per share and stock return of commercial banks.
The result shows that the average market price per share is highest for SCBL (Rs 3285) and lowest for SRBL (Rs.213.75). The average stock returns are highest for NBB and MBL (27.47 percent) and lowest for SCBL (-5.68 percent). the average excess returns are highest for NBB (23.11 percent) and lowest for SCBL (-10 percent). SCBL has the highest dividend per share of Rs.69.53 and NBB has the lowest i.e. Rs 5.62. The average return on assets is largest for NBB (5.45 percent) and lowest for MBL (0.6 percent). Likewise, the average return on equity is highest for NBB (43.28 percent) and lowest for KBL (6.93 percent). NBB has highest average earning price ratio of 16.03 percent whereas it is lowest for MBL i.e. 2.05 percent. The average leverage is highest for SBI (93.15 percent) and lowest for SRBL (78.86 percent). NBB has the highest book to market ratio of 48.01 percent whereas SCB has lowest i.e. 10.35 percent. Similarly, the average firm size is largest for Nabil (Rs. 24.46 billion) and lowest for SRBL (Rs. 16.81 billion).
The descriptive statistics shows that market price per share ranges from Rs.107 to Rs. 6830.00, leading to an average market price per share of Rs. 952.65 while the stock return varies from negative 72.03 percent to 204.93 percent, leading to an average stock return of 7.85 percent. While the excess return varies from negative 78.09 percent to 204.17 percent, leading to an average excess return of 3.49 percent. The average dividend per share is noticed to be Rs. 21.98 with a minimum of Rs. 0.0 and a maximum of Rs. 130. Likewise, return on assets ranges from -0.99 percent to 18.04 percent, leading to an average of 1.87 percent. Return on equity has a minimum of negative 6.14 percent and a maximum of 193.35 percent, leading to an average of 20.25 percent. Firm size ranges from Rs. 21.34 billion to Rs. 25.07 billion, leading to an average firm size to Rs. 23.10billion. The average earning price ratio is noticed to be 5.38 percent with a minimum of 0.0 percent and a maximum of 41.43 percent. Similarly, the average leverage is noticed to be 90.47 percent with a minimum of 76.70 percent and a maximum of 96.42 percent. Moreover, the average book to market ratio is noticed to be 31.05 percent with a minimum of 5.45 percent and a maximum of 121.49 percent.
The result shows that dividend per share, return on assets, return on equity, leverage and firm size are positively related to market price per share. Whereas, book to market ratio and earning price ratio are negatively related with market price per share. Dividend per share and firm size are positively related with stock return and excess return. Whereas, return on assets, return on equity, book to market ratio, earning price ratio and leverage are negatively related with stock return and excess return.
The beta coefficient for dividend per share, return on equity, leverage and firm size are positive and significant with market price per share. However, the beta coefficient for earning price ratio and book to market ratio are negative and significant with market price per share. The beta coefficients are positive and significant for dividend per share and firm size with stock return. Whereas, earning price ratio and book to market ratio have negative impact on stock return and significant at 5 percent level of significance. The beta coefficients are positive for dividend per share and firm size with excess return. However, the beta coefficient for firm size is only significant at 5 percent level of significance with excess return. The beta coefficient for earning price ratio and book to market ratio are negative with excess return. However, the beta coefficient for earning price ratio is only significant at 5 percent level of significance with excess return.
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