| Title : | Effect of liquidity and profitability on stock returns of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Benju Thapa, Author | | Publication Date: | 2019 | | Pagination: | 101p. | | Size: | GRP/Thesis | | Accompanying material: | 13/B | | Languages : | English | | Abstract: | Banks primarily involve in financial intermediation activities in an economy. The banking industry has been more complex worldwide over the years because of rapid development and growth of financial security market. Minimizing risk and maintaining competition simultaneously has always been a challenge for the banks as well as the regulatory bodies in the banking industry. The liberalization in the Nepalese economy has caused stiff competition within the banking industry. The banks are facing direct competition from financial markets and the development of disintermediation and financial innovation. Competition has the usual efficiency benefits in banking of reducing allocated and productive deadweight losses as well as fostering innovation. Similarly, regulatory measures in the monetary policy are important in preserving the sound financial stability in the banking sector. Liquidity management means ensuring that the bank possesses sufficient cash to satisfy unexpected cash outlets. If the bank is unable to do this it is known as the liquidity risk. As this risk increases, the bank is considered unable to meet its obligations (such as deposits withdrawal, debt maturity and funds for loan portfolio and investment).
As an important part of the financial system, the banking sector plays a more important role in the development of nation's economy. Several rounds of banking reforms create a more competitive environment and improve the bank profitability. Risk implies future uncertainty about deviation from expected earnings or expected outcome. The nature of competition and risk in banking is given the prominent role banks play in the allocation of resources, the provision of capital to the economy and the stability of the financial system. Moreover, these roles in turn, have an effect on bank performance and wider economic growth and stability.
This study attempts to observe the impact of liquidity and profitability on stock returns of Nepalese commercial banks. The study is based on the secondary data which are gathered for 18 commercial banks in Nepal for the period of 9 years form 2009/10 to 2017/18. The main sources of data are banking and financial statistics published by Nepal Rastra Bank, annual reports of different sample banks, and supervision report of Nepal Rastra Bank. This study has employed descriptive research design and casual comparative research design as it deals with the relationship of liquidity and profitability on stocks return of Nepalese commercial banks. The result reveals that average earnings per share and market price per share.
The study considered the independent variables: current ratio, quick ratio, cash deposit ratio, return on assets, return on equity. The result has been derived by suing descriptive statistics, correlation analysis and multiple regression analysis. The shows that the average market price per share is highest for Siddhartha Commercial Bank (Rupees 1804.9909) and lowest for Kathmandu Bank Limited (Rupees 151.56498). The average earnings per share is highest for Laxmi Bank Limited (Rupees 586.1111) and lowest for Sunrise Bank Limited (Rupees 7.7). The average return on assets is highest for Agricultural Development Bank Limited (2.63 percentage) and lowest for Nabil Bank Limited (0.92) The average return on equity is highest for Nepal Bangladesh bank Limited (10.84345 percentage) and lowest for Siddhartha Bank Limited (2.87312 percentage). The average current ratio is highest for Sunrise Bank Limited (29.40 percentage) and lowest for Himalayan Bank Limited (7.18 percentage).The average quick ratio is highest for NMB Bank Limited (0.6428) and lowest for Himalayan Bank Limited (0.092). The study also reveals that the average cash deposit ratio is highest for NMB Bank (1.03271) and lowest for Agricultural Development Bank Limited (0.01683). Furthermore, the study also concludes that the average value of EPS, MPS, ROA, ROE, CR, QR, and CDR are 35.4170, 787.6049, 1.7349, 18.3020, 14.9235, .1613, .1852 respectively.
The result reveals that the Return on Assets has a positive relation with earnings per share. It shows that increase in return on assets leads to increase in earnings per share. The result also shows that return on equity has a positive relationship between earnings per share, which means increase in return on equity leads to increase in earnings per share. However, current ratio has negative relationship with earnings per share, which means increase in current ratio tends to decrease in earnings per share. Similarly, quick ratio also has negative relation with earnings per share that tends to decrease in earnings per share as quick ratio increases. In addition, cash deposit ratio also has negative relationship with earnings per share. The increase in cash deposit ratio will lead to decrease in earnings per share.
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Effect of liquidity and profitability on stock returns of Nepalese commercial banks [printed text] / Benju Thapa, Author . - 2019 . - 101p. ; GRP/Thesis + 13/B. Languages : English | Abstract: | Banks primarily involve in financial intermediation activities in an economy. The banking industry has been more complex worldwide over the years because of rapid development and growth of financial security market. Minimizing risk and maintaining competition simultaneously has always been a challenge for the banks as well as the regulatory bodies in the banking industry. The liberalization in the Nepalese economy has caused stiff competition within the banking industry. The banks are facing direct competition from financial markets and the development of disintermediation and financial innovation. Competition has the usual efficiency benefits in banking of reducing allocated and productive deadweight losses as well as fostering innovation. Similarly, regulatory measures in the monetary policy are important in preserving the sound financial stability in the banking sector. Liquidity management means ensuring that the bank possesses sufficient cash to satisfy unexpected cash outlets. If the bank is unable to do this it is known as the liquidity risk. As this risk increases, the bank is considered unable to meet its obligations (such as deposits withdrawal, debt maturity and funds for loan portfolio and investment).
As an important part of the financial system, the banking sector plays a more important role in the development of nation's economy. Several rounds of banking reforms create a more competitive environment and improve the bank profitability. Risk implies future uncertainty about deviation from expected earnings or expected outcome. The nature of competition and risk in banking is given the prominent role banks play in the allocation of resources, the provision of capital to the economy and the stability of the financial system. Moreover, these roles in turn, have an effect on bank performance and wider economic growth and stability.
This study attempts to observe the impact of liquidity and profitability on stock returns of Nepalese commercial banks. The study is based on the secondary data which are gathered for 18 commercial banks in Nepal for the period of 9 years form 2009/10 to 2017/18. The main sources of data are banking and financial statistics published by Nepal Rastra Bank, annual reports of different sample banks, and supervision report of Nepal Rastra Bank. This study has employed descriptive research design and casual comparative research design as it deals with the relationship of liquidity and profitability on stocks return of Nepalese commercial banks. The result reveals that average earnings per share and market price per share.
The study considered the independent variables: current ratio, quick ratio, cash deposit ratio, return on assets, return on equity. The result has been derived by suing descriptive statistics, correlation analysis and multiple regression analysis. The shows that the average market price per share is highest for Siddhartha Commercial Bank (Rupees 1804.9909) and lowest for Kathmandu Bank Limited (Rupees 151.56498). The average earnings per share is highest for Laxmi Bank Limited (Rupees 586.1111) and lowest for Sunrise Bank Limited (Rupees 7.7). The average return on assets is highest for Agricultural Development Bank Limited (2.63 percentage) and lowest for Nabil Bank Limited (0.92) The average return on equity is highest for Nepal Bangladesh bank Limited (10.84345 percentage) and lowest for Siddhartha Bank Limited (2.87312 percentage). The average current ratio is highest for Sunrise Bank Limited (29.40 percentage) and lowest for Himalayan Bank Limited (7.18 percentage).The average quick ratio is highest for NMB Bank Limited (0.6428) and lowest for Himalayan Bank Limited (0.092). The study also reveals that the average cash deposit ratio is highest for NMB Bank (1.03271) and lowest for Agricultural Development Bank Limited (0.01683). Furthermore, the study also concludes that the average value of EPS, MPS, ROA, ROE, CR, QR, and CDR are 35.4170, 787.6049, 1.7349, 18.3020, 14.9235, .1613, .1852 respectively.
The result reveals that the Return on Assets has a positive relation with earnings per share. It shows that increase in return on assets leads to increase in earnings per share. The result also shows that return on equity has a positive relationship between earnings per share, which means increase in return on equity leads to increase in earnings per share. However, current ratio has negative relationship with earnings per share, which means increase in current ratio tends to decrease in earnings per share. Similarly, quick ratio also has negative relation with earnings per share that tends to decrease in earnings per share as quick ratio increases. In addition, cash deposit ratio also has negative relationship with earnings per share. The increase in cash deposit ratio will lead to decrease in earnings per share.
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