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Effect of market valuation measures on stock price of the Nepalese commercial banks / Lok Raj Ojha
Title : Effect of market valuation measures on stock price of the Nepalese commercial banks Material Type: printed text Authors: Lok Raj Ojha, Author Publication Date: 2019 Pagination: 118p. Size: GRP/Thesis Accompanying material: 1st/Gmba Languages : English Abstract: 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. It works as an intermediary between savers and companies seeking additional financing for business expansion. A stock market is very crucial to sustainable economic growth as it can assure the flow of resources to the most productive investment opportunities (Tease, 1993). The recognition of vital sectors in the stock exchange and the identification of the dynamic variables affecting stock prices occupy an important position in the growth and development of the stock exchange. They also play an important role in dynamic issues of securities exchanges. The estimation of market valuation indicators and their impact on stock price is expected to help in true deal, and these result in closing the deal price of stocks to their normal prices (Nazemi M., 2012). The market price of a share is a key factor that influence investment decision of stock market. The share price is one of the most important indicators available to the investors for their decision to invest or not in a particular stock (Gill & Mathur, 2012).
This study attempts to examine an effect of market valuation measure on stock price of the Nepalese commercial banks. The study is based on the secondary data which are gathered for 21 Nepalese commercial banks with 147 observations for the period of 7 years from 2011/12 to 2017/18. The secondary data are collected from the Banking and Financial Statistics and Bank Supervision Report published by Nepal Rastra Bank and annual reports of the selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design. Therefore, s regression models are estimated to test the significance and importance of market valuation measure variables on the stock price of Nepalese commercial banks.
The result shows that the average stock return is highest for ADBL (64 percent) and lowest for KBL (-4.81 percent). The average market price of share is highest for SCBL (Rs.2293.72) and lowest for JBNL (Rs.192.29). The average Earning per share is highest for NABIL (Rs.68.81) and lowest for JBNL (Rs.10.15). NIBL has highest average bank size (Rs.111, 703 million) and JBNL has lowest average bank size (Rs.32, 806 million). EBL has highest average book value per share (Rs.299.05) and CZBIL has lowest average book value per share (Rs.121.69). The descriptive analysis shows that the average stock return and average market price of share are 20.71 percent and Rs.687.55 percent of selected commercial banks. The results also show that the average book value per share and earning per share are Rs.178.85 percent and Rs.32.68 respectively for selected commercial banks. Average bank size is Rs.62375.47 million. The average price earnings ratio is 22.92 times, dividend per share is Rs25.34 and dividend payout ratio is 0.9971 percent.
The correlation matrix of selected commercial banks shows that the market price of share, stock return have positive relationship with earning per share .However, dividend payout ratio have negative relationship with stock return and market price of share. The result shows that dividend per share and book value per share are positively correlated to market price of share. Similarly, the result revealed that bank size is positively correlated to market price of share. The study showed that price earnings ratio is positively related to stock return. The correlation result revealed that earning per share is positively correlated to stock return. However, book value per share, dividend payout ratio have negatively correlated to stock return. Furthermore, the bank size and price earning per share have positive correlation with stock return.
The regression results shows that earning per share has a significant and positive impact on market price of share and stock return. Likewise, dividend payout ratio has negative impact on market price per share and stock return. The significant and positive beta coefficient of bank size with market price of share and stock return. Likewise, the positive beta coefficient of price earnings ratio with the market price of share. In addition, the significant and positive beta coefficient of dividend per share with the market price of share. Book value has positive and significant effects on market price per share. Likewise, the positive beta coefficient of price earnings ratio with the stock return. On the other hand, dividend per share has negative impact on stock return showing In addition book value per share has negative beta coefficient with stock return.
The report also investigates the fact that the analysis conducted has limitations. Finance companies and development banks has not been used in study, only 21 commercial banks have been used as sample due to availability of data and the study has assumed the linear relationship between dependent and independent variables.
Effect of market valuation measures on stock price of the Nepalese commercial banks [printed text] / Lok Raj Ojha, Author . - 2019 . - 118p. ; GRP/Thesis + 1st/Gmba.
Languages : English
Abstract: 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. It works as an intermediary between savers and companies seeking additional financing for business expansion. A stock market is very crucial to sustainable economic growth as it can assure the flow of resources to the most productive investment opportunities (Tease, 1993). The recognition of vital sectors in the stock exchange and the identification of the dynamic variables affecting stock prices occupy an important position in the growth and development of the stock exchange. They also play an important role in dynamic issues of securities exchanges. The estimation of market valuation indicators and their impact on stock price is expected to help in true deal, and these result in closing the deal price of stocks to their normal prices (Nazemi M., 2012). The market price of a share is a key factor that influence investment decision of stock market. The share price is one of the most important indicators available to the investors for their decision to invest or not in a particular stock (Gill & Mathur, 2012).
This study attempts to examine an effect of market valuation measure on stock price of the Nepalese commercial banks. The study is based on the secondary data which are gathered for 21 Nepalese commercial banks with 147 observations for the period of 7 years from 2011/12 to 2017/18. The secondary data are collected from the Banking and Financial Statistics and Bank Supervision Report published by Nepal Rastra Bank and annual reports of the selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design. Therefore, s regression models are estimated to test the significance and importance of market valuation measure variables on the stock price of Nepalese commercial banks.
The result shows that the average stock return is highest for ADBL (64 percent) and lowest for KBL (-4.81 percent). The average market price of share is highest for SCBL (Rs.2293.72) and lowest for JBNL (Rs.192.29). The average Earning per share is highest for NABIL (Rs.68.81) and lowest for JBNL (Rs.10.15). NIBL has highest average bank size (Rs.111, 703 million) and JBNL has lowest average bank size (Rs.32, 806 million). EBL has highest average book value per share (Rs.299.05) and CZBIL has lowest average book value per share (Rs.121.69). The descriptive analysis shows that the average stock return and average market price of share are 20.71 percent and Rs.687.55 percent of selected commercial banks. The results also show that the average book value per share and earning per share are Rs.178.85 percent and Rs.32.68 respectively for selected commercial banks. Average bank size is Rs.62375.47 million. The average price earnings ratio is 22.92 times, dividend per share is Rs25.34 and dividend payout ratio is 0.9971 percent.
The correlation matrix of selected commercial banks shows that the market price of share, stock return have positive relationship with earning per share .However, dividend payout ratio have negative relationship with stock return and market price of share. The result shows that dividend per share and book value per share are positively correlated to market price of share. Similarly, the result revealed that bank size is positively correlated to market price of share. The study showed that price earnings ratio is positively related to stock return. The correlation result revealed that earning per share is positively correlated to stock return. However, book value per share, dividend payout ratio have negatively correlated to stock return. Furthermore, the bank size and price earning per share have positive correlation with stock return.
The regression results shows that earning per share has a significant and positive impact on market price of share and stock return. Likewise, dividend payout ratio has negative impact on market price per share and stock return. The significant and positive beta coefficient of bank size with market price of share and stock return. Likewise, the positive beta coefficient of price earnings ratio with the market price of share. In addition, the significant and positive beta coefficient of dividend per share with the market price of share. Book value has positive and significant effects on market price per share. Likewise, the positive beta coefficient of price earnings ratio with the stock return. On the other hand, dividend per share has negative impact on stock return showing In addition book value per share has negative beta coefficient with stock return.
The report also investigates the fact that the analysis conducted has limitations. Finance companies and development banks has not been used in study, only 21 commercial banks have been used as sample due to availability of data and the study has assumed the linear relationship between dependent and independent variables.
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Barcode Call number Media type Location Section Status 622/D LOK Thesis/Dissertation Uniglobe Library Philosophy & Psychology Available