| Title : | Firm specific and macroeconomic determinants of share prices of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Arun Kumar Sapkota, Author | | Publication Date: | 2016 | | Pagination: | 92p. | | Size: | GRP/Thesis | | Accompanying material: | 6/B | | Languages : | English | | Descriptors: | Macroeconomics
| | Class number: | 332.632 | | Abstract: | Stock market is an important part of the economy of a country. The stock market plays a pivotal role in the growth of the industry and commerce of the country that eventually affects the economy of the country to a great extent(Fama and French, 2007). It works as the channel through which the public savings are channelized to industrial and business enterprises. Mobilization of such resources for investment is certainly a necessary condition for economic take off, but quality of their allocation to various investment projects is an important factor for growth. This is precisely what an efficient stock market does to the economy. Delcoure (2012) stated that even in less developed countries, capital markets are able to mobilize domestic savings and allocate funds more efficiently. In such markets, long term economic growth is promoted by providing investors with liquidity, risk diversification, information about firms, corporate control and saving mobilization. The stock market is an important source of company finance, which offers greater flexibility than borrowing from banks.
In the securities market, whether the primary or the secondary market, the price of equity is significantly influenced by a number of factors which include book value of the firm, dividend per share, earnings per share, price earnings ratio and dividend cover (Gompers, Ishii &Metrick, 2003). Corwin (2003) identifies uncertainty and asymmetric information as a strong influence on the firm’s equity pricing and as a matter of fact leads to under priced instrument. In the light of the preceding literature review, both micro and macroeconomic factors have impact on equity pricing in the stock market. The impact differs from firm to firm, industry to industry, economy to economy and from time to time, but one comforting conclusion is that most of the factors appear to have the same behavior regardless of time, industry or firm constraints. For instance, increased inflation and interest rates, declining dividends, earnings, and poor management have negative impact on equity pricing and vice-versa.
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 major purpose of this study is to identify the firm-specific and macroeconomic determinants of share price in Nepalese commercial banks. The specific objectives of this study are: a) to examine the relationship between macro-economic factors such as GDP, inflation & interest rate and share prices, b) to analyze the impact of ROA and P/E ratio on share price, c) to evaluate the effect of EPS and DPS on share price, d) to determine the impact of leverage on share price, e) to find out which of the macro and firm specific factors explain the variation in share price.
This study has employed descriptive research design and causal comparative research design to deal with issues associated with factors influencing share price of the commercial banks in the context of Nepal. The descriptive research design has been adopted for fact finding and search adequate information about impact of firm-specific and macroeconomic variables on market price of the share. This study also employs causal comparative research design to determine the effect of bank specific and macroeconomic variables on share price of Nepalese commercial banks.The secondary data for the study are collected from various sources such as annual report of the sample banks, NRB data base, books and journals.
The result shows that there is positive relationship between earning per share, dividend per share, price earning ratio, return on assets, gross domestic product and market price of share.Likewise, the result shows that there is negative relationship between leverage, inflation, interest rate and market price of share.The result also shows that there is positive relationship of earning per share, dividend per share, price earning ratio, gross domestic product withstock return and excess return whereas there is negative relationship of leverage, return on assets, inflation and interest rate withstock return and excess return. The study revealed that earning per, dividend per share, price earning ratio, leverage, return on assets and gross domestic product are among the most dominant variables that affect the market price of share in the context of Nepalese commercial banks.
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Firm specific and macroeconomic determinants of share prices of Nepalese commercial banks [printed text] / Arun Kumar Sapkota, Author . - 2016 . - 92p. ; GRP/Thesis + 6/B. Languages : English | Descriptors: | Macroeconomics
| | Class number: | 332.632 | | Abstract: | Stock market is an important part of the economy of a country. The stock market plays a pivotal role in the growth of the industry and commerce of the country that eventually affects the economy of the country to a great extent(Fama and French, 2007). It works as the channel through which the public savings are channelized to industrial and business enterprises. Mobilization of such resources for investment is certainly a necessary condition for economic take off, but quality of their allocation to various investment projects is an important factor for growth. This is precisely what an efficient stock market does to the economy. Delcoure (2012) stated that even in less developed countries, capital markets are able to mobilize domestic savings and allocate funds more efficiently. In such markets, long term economic growth is promoted by providing investors with liquidity, risk diversification, information about firms, corporate control and saving mobilization. The stock market is an important source of company finance, which offers greater flexibility than borrowing from banks.
In the securities market, whether the primary or the secondary market, the price of equity is significantly influenced by a number of factors which include book value of the firm, dividend per share, earnings per share, price earnings ratio and dividend cover (Gompers, Ishii &Metrick, 2003). Corwin (2003) identifies uncertainty and asymmetric information as a strong influence on the firm’s equity pricing and as a matter of fact leads to under priced instrument. In the light of the preceding literature review, both micro and macroeconomic factors have impact on equity pricing in the stock market. The impact differs from firm to firm, industry to industry, economy to economy and from time to time, but one comforting conclusion is that most of the factors appear to have the same behavior regardless of time, industry or firm constraints. For instance, increased inflation and interest rates, declining dividends, earnings, and poor management have negative impact on equity pricing and vice-versa.
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 major purpose of this study is to identify the firm-specific and macroeconomic determinants of share price in Nepalese commercial banks. The specific objectives of this study are: a) to examine the relationship between macro-economic factors such as GDP, inflation & interest rate and share prices, b) to analyze the impact of ROA and P/E ratio on share price, c) to evaluate the effect of EPS and DPS on share price, d) to determine the impact of leverage on share price, e) to find out which of the macro and firm specific factors explain the variation in share price.
This study has employed descriptive research design and causal comparative research design to deal with issues associated with factors influencing share price of the commercial banks in the context of Nepal. The descriptive research design has been adopted for fact finding and search adequate information about impact of firm-specific and macroeconomic variables on market price of the share. This study also employs causal comparative research design to determine the effect of bank specific and macroeconomic variables on share price of Nepalese commercial banks.The secondary data for the study are collected from various sources such as annual report of the sample banks, NRB data base, books and journals.
The result shows that there is positive relationship between earning per share, dividend per share, price earning ratio, return on assets, gross domestic product and market price of share.Likewise, the result shows that there is negative relationship between leverage, inflation, interest rate and market price of share.The result also shows that there is positive relationship of earning per share, dividend per share, price earning ratio, gross domestic product withstock return and excess return whereas there is negative relationship of leverage, return on assets, inflation and interest rate withstock return and excess return. The study revealed that earning per, dividend per share, price earning ratio, leverage, return on assets and gross domestic product are among the most dominant variables that affect the market price of share in the context of Nepalese commercial banks.
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