| Title : | The effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Mijas Lama, Author | | Publication Date: | 2016 | | Pagination: | 93p. | | Size: | GRP/Thesis | | Accompanying material: | 7/B | | Languages : | English | | Descriptors: | Macroeconomics
| | Class number: | 332.642 | | Abstract: | The performance of the stock market is a strong indicator of general economic performance and is an integral part of the economy of the country. With the introduction of free and open economic policies and advanced technologies, investors are finding easy access to stock markets around the world. The fact that stock market indices have become an indication of the health of the economy of a country indicates the importance of stock markets. This increasing importance of the stock market has motivated the formulation of many theories to describe the working of the stock markets (Gupta, Chevalier & Sayekt, 2008).
The stock market plays a significant role in the economy of a country and important role in the allocation of resources, both directly as a source of funds and as a determinant of firms’ value and its borrowing capacity (Tease, 1993). The stock market has become an essential market playing a vital role in economic prosper that fostering capital formation and sustaining economic growth. Stock markets are more than a place to trade securities. They operate as a facilitator between savers and users of capital by means of pooling of funds, sharing risk and transferring wealth. Stock markets are essential for economic growth as they insure the flow of resources to the most productive investment opportunities. The share price is one of the most important indicators available to the investors for their decision to invest in or not a particular share (Gill et al., 2012). The stock price in the market is not static rather it changes every day. The most obvious factors that influence are demand and supply factors.
Fama (1991) has suggested that the fundamental variables such as earning yield, size, book to market value, cash flow yield and leverage are the important determinants of the stock return. Srinivasan (2013) argued that understanding the impact of various fundamental variables on stock price is very much helpful to investors as it will help them in taking profitable investment decisions.
This study examines the effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks with respect to banks specific variables and macroeconomic variables. The specific objectives of this study is to analyze the relationship and impact of bank size, earning per share, return on asset, dividend per share, money supply, inflation, interest rate and gross domestic product growth rate on stock price of Nepalese commercial banks. The research is based on secondary data. The methods used for secondary data analysis included descriptive analysis, correlation analysis and regression analysis. Hence, this study has employed descriptive research design and causal comparative research design. The study has taken 18 Nepalese commercial banks as a sample and 126 observations from 2007/08 to 2013/14.
The result reveals that Standard Chartered bank has the highest average market price of share and highest average dividend per share where as average earning per share is highest for Nabil bank limited. It is found that the average market price of share is Rs.1021.50 where as average size is Rs.35630.11 million for Nepalese commercial banks. Similarly, average EPS is Rs.36.46 and average ROA is 1.66 percent. The Nepalese commercial banks have Rs.20.62 average DPS throughout the study period. The average stock return is found to be 12.21 percent whereas the average excess return is 7.30 percent. The result shows that there is positive relationship of market price per share with size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product. It indicates that an increase in size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product leads to an increase in the market price per share. However the beta coefficient is insignificant for inflation. Similarly, the result shows that there is negative relationship of market price per share with interest rate which reveals that higher the interest rate, lower would be the market price of share.
The result also shows that stock return and excess are positively related with size, earning per share, dividend per share, and gross domestic product. It shows that an increase in size, earning per share, dividend per share and gross domestic product leads to an increase in stock return and excess return. Similarly, there is negative relationship of money supply, return on assets, inflation and interest rate with stock return and excess return which reveals that higher the money supply, size, inflation and interest rate, lower would be the stock return and excess return. However, the beta coefficient for size, inflation, interest rate and gross domestic product are significant.
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The effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks [printed text] / Mijas Lama, Author . - 2016 . - 93p. ; GRP/Thesis + 7/B. Languages : English | Descriptors: | Macroeconomics
| | Class number: | 332.642 | | Abstract: | The performance of the stock market is a strong indicator of general economic performance and is an integral part of the economy of the country. With the introduction of free and open economic policies and advanced technologies, investors are finding easy access to stock markets around the world. The fact that stock market indices have become an indication of the health of the economy of a country indicates the importance of stock markets. This increasing importance of the stock market has motivated the formulation of many theories to describe the working of the stock markets (Gupta, Chevalier & Sayekt, 2008).
The stock market plays a significant role in the economy of a country and important role in the allocation of resources, both directly as a source of funds and as a determinant of firms’ value and its borrowing capacity (Tease, 1993). The stock market has become an essential market playing a vital role in economic prosper that fostering capital formation and sustaining economic growth. Stock markets are more than a place to trade securities. They operate as a facilitator between savers and users of capital by means of pooling of funds, sharing risk and transferring wealth. Stock markets are essential for economic growth as they insure the flow of resources to the most productive investment opportunities. The share price is one of the most important indicators available to the investors for their decision to invest in or not a particular share (Gill et al., 2012). The stock price in the market is not static rather it changes every day. The most obvious factors that influence are demand and supply factors.
Fama (1991) has suggested that the fundamental variables such as earning yield, size, book to market value, cash flow yield and leverage are the important determinants of the stock return. Srinivasan (2013) argued that understanding the impact of various fundamental variables on stock price is very much helpful to investors as it will help them in taking profitable investment decisions.
This study examines the effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks with respect to banks specific variables and macroeconomic variables. The specific objectives of this study is to analyze the relationship and impact of bank size, earning per share, return on asset, dividend per share, money supply, inflation, interest rate and gross domestic product growth rate on stock price of Nepalese commercial banks. The research is based on secondary data. The methods used for secondary data analysis included descriptive analysis, correlation analysis and regression analysis. Hence, this study has employed descriptive research design and causal comparative research design. The study has taken 18 Nepalese commercial banks as a sample and 126 observations from 2007/08 to 2013/14.
The result reveals that Standard Chartered bank has the highest average market price of share and highest average dividend per share where as average earning per share is highest for Nabil bank limited. It is found that the average market price of share is Rs.1021.50 where as average size is Rs.35630.11 million for Nepalese commercial banks. Similarly, average EPS is Rs.36.46 and average ROA is 1.66 percent. The Nepalese commercial banks have Rs.20.62 average DPS throughout the study period. The average stock return is found to be 12.21 percent whereas the average excess return is 7.30 percent. The result shows that there is positive relationship of market price per share with size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product. It indicates that an increase in size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product leads to an increase in the market price per share. However the beta coefficient is insignificant for inflation. Similarly, the result shows that there is negative relationship of market price per share with interest rate which reveals that higher the interest rate, lower would be the market price of share.
The result also shows that stock return and excess are positively related with size, earning per share, dividend per share, and gross domestic product. It shows that an increase in size, earning per share, dividend per share and gross domestic product leads to an increase in stock return and excess return. Similarly, there is negative relationship of money supply, return on assets, inflation and interest rate with stock return and excess return which reveals that higher the money supply, size, inflation and interest rate, lower would be the stock return and excess return. However, the beta coefficient for size, inflation, interest rate and gross domestic product are significant.
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