IMPACT OF PROFITABILITY ON MARKET PRICE OF STOCK

A Project Work Report

Submitted By:
ANISH DANAI
TU Registration No:
Symbol No. :
Group: Finance
MARSYANGDI MULTIPLE CAMPUS

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

Bachelor of Business Studies (BBS)

Lamjung, Nepal
2025
 Declaration

I hereby declare that the project work entitled ‘‘Impact of Profitability on Market Price of
Stock’’ submitted to the Faculty of Management, Tribhuvan University, Kathmandu is an
original piece of work under the supervision of Dr. Padam Bahadur Rawat faculty
member of Marshyangdi Multiple Campus, Lamjung, Nepal and is submitted in partial
fulfillment of the requirements for the degree of Bachelors in Business studies (BBS). This
project work report has not been submitted to any other university or institution for the
award of any degree or diploma.

…………………
Anish Danai
Date :

2
 Supervisor’s Recommendation

The project work entitled ‘‘Impact of Profitability on Market Price of Stock’’ submitted
by ANISH DANAI of MARSHYANGDI MULTIPLE CAMPUS is prepared under my
supervision as per the procedure and format requirements laid by the Faculty of Management,
Tribhuvan University, as partial fulfillment of the requirements for the degree of Bachelors in
Business Studies (BBS). I, therefore recommend the project work report for evaluation.

…………………….
Dr. Padam Bahadur Rawat
(Supervisor)
Marshyangdi Multiple Campus
Date :

3
 Endorsement

We hereby endorse the project work report entitled ‘‘Impact of Profitability on Market
Price of Stock’’ submitted by ANISH DANAI in partial fulfillment of the requirement for
the requirements for the degree of the Bachelors of Business Studies (BBS) for external
evaluation.

…………… ………………
Dr. Padam Bahadur Rawat Mr. Hari Babu Thapa
Chairman, Research Committee Campus Chief
Date : Date :

4
 Acknowledgement
This report entitled ‘‘Impact of Profitability on Market Price of Stock’’ has been prepared
in the form as required by the institute of management for the reward of degree of Bachelor
of Business Studies (BBS).

This study is has not been finished overnight or with a single attempt. It took a lot of time and
effort to this project to come to the end. This particular fieldwork is a joint effort and
commitment of various individuals. Due to the limited time frame, it was really a tough job and
it would be dishonest not to acknowledge all the beneficiaries associated with this study amid
the study period.

I have great pleasure to express my heartiest gratitude and sincerity to my report advisor Dr.
Padam Bahadur Rawat, who guided me throughout this research providing valuable
direction, useful suggestions, comments and references during the course of preparing this
report.

I will further like to express my gratitude towards all the members of respective banks for
making it easy and possible to get the required data in the short period of time. I heartily thank
them for providing me their precious time. It would be injustice to disregard their commitment.
And lastly I would like to thank my parents and dear friends for helping me out and encouraging
me to get this project through.

Thank You
Anish Danai

5
 Table of Contents

Page No.
Title Page……………………………………………………………………………………………………...i
Declaration........................................................................................................................................... ii
Supervisor’s Recommendation............................................................................................................ iii
Endorsement........................................................................................................................................ iv
Acknowledgement................................................................................................................................. v
Table of Contents................................................................................................................................. vi
List of Tables..................................................................................................................................... viii
List of Figure....................................................................................................................................... ix
Abbreviations........................................................................................................................................ x
CHAPTER – I....................................................................................................................................... 1
INTRODUCTION................................................................................................................................. 1
1.1 Background of the Study............................................................................................................. 1

1.2. Objectives of the Study............................................................................................................... 2

1.3. Rationale of the Study................................................................................................................ 3

1.4 Review of Literature.................................................................................................................... 3

1.4.1 Research Gap........................................................................................................................ 9

1.5 Research Methodology................................................................................................................ 9

1.5.1 Research Design................................................................................................................... 9

1.5.2 Sources of Data..................................................................................................................... 9

1.5.3 Population and Sample......................................................................................................... 9

1.5.4 Data Collection Procedure.................................................................................................. 10

1.5.5 Research Framework and Definitions of Variables............................................................10

1.5.6 Method of Analysis............................................................................................................ 12

1.6. Limitations of the Study........................................................................................................... 13

vi
CHAPTER – II.................................................................................................................................... 14
RESULTS AND ANALYSIS............................................................................................................. 14
2.1 Descriptive Statistics of Variables............................................................................................. 14

2.2 Correlation Analysis.................................................................................................................. 15

2.3 Regression Analysis.................................................................................................................. 16

2.4 Major Findings.......................................................................................................................... 18

CHAPTER –III................................................................................................................................... 19
SUMMARY AND CONCLUSION.................................................................................................... 19
3.1 Summary.................................................................................................................................... 19

3.2 Conclusion................................................................................................................................. 19

3.3 Recommendation....................................................................................................................... 20

REFERENCES.................................................................................................................................... 21
APPENDICES.................................................................................................................................... 25

vii
 List of Tables

Table 1 Descriptive Statistics of Variable of Development banks ................................25

Table 2 Correlation Coefficients of Study Variables ....................................................26
Table 3 Model Summary of MVPS ..............................................................................27
Table 4 ANOVA ........................................................................................................ ..27
Table 5 Regression Coefficients ...................................................................................28

viii
 List of Figure

Figure 1 Research Framework ………………………………………………………………….20

ix
 Abbreviations

BOD : Board of Directors

C.V. : Coefficient of Variation

DPS : Dividend per Share

EPS : Earnings per Share

GBBL : Garima Bikas Bank Limited

GDP : Gross Domestic Product

ICAN : Institute Of Chartered Accountants of Nepal

IPO : Initial Public Offering

JBBL : Jyoti Bikas Bank Limited

LBBL : Lumbini Bikas Bank Limited

LC : Letter Of Credit

MVPS : Market Value per Share

NEPSE : Nepal Stock Exchange

NRB : Nepal Rastra Bank

P/E : Price Earnings

ROC : Registrar of Companies

S.D. : Standard Deviation

SADBL : Shangrila Bikas Bank Limited

SEB : Securities Exchange Board

SEC : Securities Exchange Centre

x
 CHAPTER – I
INTRODUCTION
1.1 Background of the Study
The stock market is a mechanism designed to make it easier to exchange financial assets that
have a longer maturity term than a year. It is a broad term that includes all agencies that
facilitate the sale and resale of securities as well as buyers and sellers of securities. People
purchase and sell securities on the stock market, which are less physical than gold but just as
valuable. Financial securities can be exchanged on the stock market, which makes it easier to
mobilize both internal and external financial resources.

One of the most important factors influencing a company's stock price is its profitability.
Companies that are successful typically attract the attention of investors since they are a good
sign of a company's sound financial standing and capacity to produce returns for owners.
Earnings per share (EPS) is directly impacted by a company's profitability. Investors use
earnings per share (EPS) as a key statistic to evaluate a company's profitability.

Increased EPS is a direct effect of increasing earnings, and higher EPS frequently results in
higher stock prices. Profitable businesses might choose to keep their profits in order to
reinvest them back into the company or to pay dividends to its shareholders. Retained
earnings may result in future growth and draw in income-seeking investors, both of which
could raise the price of the stock.

Profitable businesses are frequently preferred by institutional investors, including mutual

funds and pension funds, because of their stability and possibility for expansion. Institutional
investors' growing interest in the stock may raise demand for it and raise its market price.

The stock market is acknowledged as a successful means of generating capital for businesses
while simultaneously offering individuals and institutions with excess funds a chance for
investment. By offering a variety of assets, such as stocks, corporate bonds, mutual funds,
stock derivatives, etc., the company can raise money from the stock market. In a similar vein,
the government may raise money from the stock market by issuing municipal and
development bonds. However, selling securities is only feasible if the market provides equal
opportunity for both institutional and individual investors, as well as for long-term capital
 2

investments and short-term speculative ventures. In addition to the general development and
management of the market, protecting investors' interests is crucial for drawing in a large
number of domestic and international investors.

In the field of corporate policy, the correlation between market share and profitability has
perhaps received the greatest research attention. This study aims to investigate how several
factors (market share, concentration ratio, etc.) affect bank profitability measurements in
Bulgaria. Based on balanced panel data from 22 banks between 2006 and 2010, the analysis
was conducted. The primary research hypothesis for the evaluation of bank profitability using
return on equity (ROE), one of the most popular metrics, is that the top banks (based on
market share) should have higher profitability. The survey's findings indicate a favorable and
statistically significant correlation between banks' market share and profitability.

The findings of empirical research verify that there is no statistically significant correlation
between the profitability of the Bulgarian banking industry and its level of concentration.
According to the estimation results, changes in the external macroeconomic environment
have no effect on the profitability of Bulgarian banks; rather, it is solely driven by factors
connected to their management actions. The results of this investigation have several
managerial ramifications. The bank can increase its market share in order to boost
profitability first. Secondly, bank management shouldn't be concerned about the level of
industry concentration. Analysis reveals that the factor affecting bank profitability is
management rather than concentration (Genchev, 2012).

This study is to investigate the relationship between book value per share, P/E ratio, market
value per share, earnings per share, and dividend per share in relation to the aforementioned
topics. Additionally displays the effect on market value per share of earnings per share,
dividends per share, book value per share, and P/E ratio.

1.2. Objectives of the Study

The major objective of this study is to find out effects of Profitability on Market Price of
Nepalese Development banks. The main objectives of the study are as follow:
• To explain the position of EPS, DPS, BVPS, P/E ratio and MPS of development
banks of Nepal.
 3

• To identify the relationship between EPS, DPS, BVPS, P/E ratio and MPS of
development banks of Nepal.
• To examine the impact of EPS, DPS, BVPS, and P/E ratio on MPS.

1.3. Rationale of the Study

Everyone is drawn to investing in shares in order to optimize their money and receive a
higher return. Therefore, analyzing the share price sensitivity on the Nepalese stock market
has shown to be a successful strategy for drawing in new investors. For individual investors
who wish to trade in securities of multinational corporations and Nepalese companies, the
study will be essential. Understanding the share prices of Nepal's numerous listed companies
would also be aided by this study. All parties involved in the Nepalese share market,
including policymakers, shareholders, and management, will benefit from it.
Investors may find this study useful in considering a portfolio reorganization. In a similar
vein, prospective investors might base their timely investing decisions on the study's findings.
The results will hold greater significance for researchers and academics studying the
Nepalese stock market in the future.

The purpose of this study is to investigate the potential, issues, and future prospects of the
Nepali stock market. Learning about the financial standing of particular banks will also be
beneficial. Consequently, it is anticipated that this study will be beneficial to general
investors and stock market-related organizations.

1.4 Review of Literature

The purpose of this section is to evaluate the body of knowledge regarding the evolution of
the stock market and economic growth. The pertinent papers and literature are examined
from both domestic and foreign publications that are accessible through various libraries,
organizations, and websites and are very important to our investigation. On this topic, a few
books, journals, and research working papers have been reviewed.
Kumari (2019) conducted a study on An Empirical Analysis of Stock Price Behaviour around
Bonus Issue Announcement in India. Given this, the current study looks into how Bonus Issue
announcements affected the Indian stock market over a five-year period, from 2014 to 2018.
Announcements of corporate actions are typically interpreted as positive news for market
investors. The data have been analyzed and interpreted using statistical methods such as t-
 4

test, mean, standard deviation, regression analysis, percentage analysis, and CAGR
(Compounded Annual Growth Rate). To examine the abnormal return taking into account
nine companies, an investigation window (t-10 to t+10) was taken for all bonus issue
announcement events. The outcome shows that the announcement of a bonus share issue has
no effect on the Indian stock market. As a result, this study supports the idea that a company's
announcement of the issuance of bonus shares has no discernible impact on the stock price.

Thapa (2019)) conducted a research on influencing factors of stock price in Nepal. The
researcher's goal is to identify the variables affecting the stock price in the Nepali market.
Earnings per share (EPS), dividend per share (DPS), market whims and rumors, and company
profiles showed a significant positive association with share price, while interest rate (IR) and
price to earnings ratio (PER) showed a significant inverse association with share price. These
findings were obtained through financial and statistical analysis using ratios and regression.
As a result, it is determined that the short-term interest rate and dividends may be the most
significant indicators of stock prices in Nepal's secondary market.

Silwal and Napit (2019) conducted a research on Fundamentals of Stock Price in Nepalese
development banks. The purpose of this study is to identify the factors that influence the stock
market price in Nepalese development banks between 2065–2066 and 2074–2075. It is based
on aggregated cross-sectional data from ten banks with stocks listed on the Nepal Stock
Exchange during a ten-year period. While BVPS has a negative correlation and is statistically
insignificant with company price, dividend yield has a positive but minimal impact on stock
price. It also shows that one of the main factors influencing Nepali stock prices is book value
per share.

Karlsson, Häggqvist and Hedberg (2020) conducted a research on Market structure and
efficiency in Swedish development banking, 1912–1938. The relationship between market
structure and performance in the Swedish development banking sector from 1912 to 1938 is
examined in this article. New market regulations were implemented at this time in an effort to
promote large-scale banking. The industry thus went through a significant era of
consolidation. Fractional regression analysis is a tool used by researchers to study how bank
mergers and market concentration affect efficiency. They discover that over this time, the
average efficiency of the Swedish development banking sector was significantly impacted
 5

negatively by market concentration. Large financial intermediaries might have been required
to provide funding for the extensive industrial and infrastructure projects.

Ashraf (2020) examined about Stock markets’ reaction to COVID-19: Cases or fatalities. The
primary aim of this paper was to investigate how the stock markets reacted to the COVID-19
epidemic. Using data on daily COVID-19 confirmed cases, deaths, and stock market returns
from 64 countries between January 22, 2020, and April 17, 2020, we conclude that the
increase in COVID-19 confirmed cases had a negative impact on stock markets. In other
words, as the number of confirmed instances rose, stock market returns decreased. We also
discover that stock markets responded more aggressively to an increase in confirmed cases
than to an increase in fatalities. Additionally, according to our data, there was a significant
negative market reaction in the early days following the confirmation of cases as well as
between 40 and 60 days later. Overall, our results suggest that stock markets quickly respond
to COVID-19 pandemic and this response varies over time depending on the stage of
outbreak.

Panta (2020) conducted a research on Macroeconomic Determinants of Stock Market Prices

in Nepal. An autoregressive distributed lag (ARDL) model is used in this study to analyze the
relationship between stock market prices (NEPSE index) and five macroeconomic variables:
real GDP, broad money supply, interest rate, inflation, and exchange rate. The goal of the
model is to explain the behavior of the NEPSSE index. The outcome shows that the broad
money supply, interest rate, inflation, and exchange rate have a significant long-term
relationship with the variation of the NEPSE Index. In the short term, the GDP, money
supply, and exchange rate can all be positively defined; however, in the long term, only the
money supply can be positively defined.

Badruzaman (2020) conducted an investigation on Nikkei 225 Index of issuers on the Japan
Stock Exchange in 2018. To calculate the impact of return on equity and earnings per share
on stock prices. There were 57 distinct issuers in this investigation. The 2018 financial report
provided the data that was used. The SPSS version 25 program's data processing results show
that Return on Equity and Earnings per Share have a 67.3 percent influence on stock prices,
with Earnings per Share having a moderately favorable impact. The negative effect of return
on equity was also felt by stock prices. EPS had the biggest and most significant effect on
 6

stock prices when these two factors were compared, whereas return on equity had the reverse
effect.

Raza et al., (2021) studied on the impact of micro and macro factors on share prices,
especially non-financial enterprises listed on the Pakistan Stock Exchange in the textile
sector (PSX). Numerous statistical analysis techniques, such as descriptive statistics,
correlation matrices, pooled OLS, Hausman tests, Breusch and Pagan LM tests, and fixed
effect models, were employed in the analysis. In Pakistan's textile industry, it was discovered
that firm share price was positively and strongly correlated with both macro and micro
dynamics (GDP, EPS, BVS, and LNFS). On the other hand, it was found that macro (INF)
and micro (DPS) dynamics were insignificant. The study adds to the corpus of information
and ongoing discussion regarding the variables affecting share price in developing markets,
specifically in Pakistan's textile industry.

Niroula (2021) conducted a research on stock price behavior of commercial banks of Nepal.
This study aims to investigate the stock price behavior of commercial banks in Nepal. MPS is
the dependent variable in this study, while the experiment factors include ROE, BV per share,
DY ratio, EPS, PE Ratio, and ROA. Using SPSS version 23, a descriptive and analytical
research design is utilized to examine and evaluate the data. The influence of independent
variables on MPS has been demonstrated using a multiple linear regression model. The
outcome shows that bank BVPS, PE ratio, and EPS have a favorable and statistically
significant impact on MPS. Other factors barely make a difference.

Endri (2021) observed about the Stock price volatility during the COVID-2019 pandemic:
The GRACH model. Using an event study methodology and the GARCH model, this research
looked at how stock prices on the Indonesia Stock Exchange (IDX) responded to COVID-19.
The study's practical implications for investors are that abnormal returns are impacted by
stock price volatility, which was brought on by the COVID-19 event. The empirical literature
that is presently being generated to look into the phenomena of stock price volatility behavior
during COVID-19 on the IDX is the basis for this study. The COVID-19 pandemic causes an
increase in stock price volatility, which in turn causes anomalous returns to drop, as
demonstrated by the GARCH model. The empirical results also support the theories of
 7

financial behavior related to uncertainty and the efficient market hypothesis theory related to
the study of occurrences.
Bhatt and Jain (2022) measured the study of economic policy uncertainty and dividend
policy: Evidence from development banks in Nepal. We looked at how Economic Policy
Uncertainty (EPU) affected dividend distribution strategy in order to offer some data from
prospective developing nations. The empirical findings show that during EPU, the banking
company in Nepal does not start or stop paying dividends. Additionally, we discovered
evidence that banking executives did not respond to policy distress with a cautious incentive.
For the banking company in Nepal, the choice to pay dividends is instinctive rather than
unclear due to shifts in economic policy. Our findings run counter to the findings of other
significant studies carried out in developed market environments, thus we recommend that
banking companies think about, assess, and modify their dividend policy in light of the
opportunities and risks presented by the national economic strategy.

Ali (2022) conducted a research on Micro-meso-level and macro-level determinants of stock

price crash risk: a systematic survey of literature. In order to identify the macro-meso and
micro-level factors influencing stock price crashes, this paper performs a comprehensive
assessment and synthesis of the empirical research on the antecedents of stock price crash
risk. The probability of a stock market crash is significantly influenced at the meso-level by
factors such as media coverage, industry-level characteristics, consumer concentration,
ownership structure, and behavioral aspects. Lastly, managerial traits, firmspecific factors,
earnings management, business policies, CEO attributes and compensation, financial
transparency, and financial transparency are micro-level factors that affect the likelihood of a
stock market crash.

Connell (2023) examined on determinants of bank profitability: evidence from the UK.
Examining the impact of macroeconomic, industry-specific, and bank-specific factors on
bank profitability among domestic UK commercial banks is the aim of this research. An
empirically motivated single equation framework incorporating the classic structure–
conduct–performance (SCP) hypothesis was employed in this investigation. To account for
profit persistence, a panel of UK banks covering the years 1998–2018 were subjected to a
generalized version of Moment's strategy. The estimation results demonstrate that all
bankspecific factors have the expected, substantial effects on bank profitability, with the
 8

exception of credit risk. But there was no proof discovered to back up the SCP theory. Bank
profitability is significantly impacted by interest rates, particularly longer-term interest rates,
and the rate of inflation; once other factors are taken into consideration, the business cycle
has a symmetrically little impact. In the UK banking sector, profitability is maintained to a
reasonable degree, suggesting that the market structure is not totally competitive.

AI- Matari (2023) examined the determinants of bank profitability of GCC: The role of bank
liquidity as moderating variable-Further analysis. The main goal of the study is to look into
the factors that affect bank profitability in the GCC countries. Ordinary least squares (OLS)
regression is used to examine data that were received from GCC banks between 2000 and
2018. The size of the bank and asset management have a major impact on the performance of
GCC banks, according to the acquired findings. Furthermore, the relationship between capital
adequacy, asset quality, and the performance of GCC banks is moderated by bank liquidity.
The bank's profitability score has a favorable correlation, according to more research.
Furthermore, there is a positive but moderate association between bank liquidity and the
performance of GCC banks as measured by their profitability score. Policymakers, regulators,
and shareholders should find this study's implications for the factors that determine bank
profitability in emerging economies-where common profitability exists—helpful in
determining the banks' appeal to investors.

Ahmeti and Iseni (2023) analyzed to investigate how certain business factors—specifically,
independent variables like liquidity, size, age, physical assets, leverage, capital, and firm
growth—affect profitability as measured by return on assets (ROA) and net profit margin
(NPM), which are the dependent variables. For the years 2015 through 2020, eleven
insurance firms make up the study's sample. The regression's findings show that the
company's age, size, and leverage all significantly affect ROA. Meanwhile, firm development
and size have a big impact on the NPM of insurance businesses in Kosovo.

Subedi (2023) examined the profitability and determinants of protected vegetable farming in
Nepal. Globally, protected vegetable farming is becoming more and more popular as a means
of increasing the quantity and quality of vegetables produced. The study's results about the
factors that influence protected vegetable farming in Nepal and its profitability are covered in
this paper. Ninety respondents who were cultivating vegetables beneath covered structures
 9

were chosen for the study, which was carried out throughout seven districts in Nepal. The
data were analyzed using multinomial logistic regression and descriptive statistics. In
comparison to semi-permanent and permanent structures, the financial analysis revealed a
noticeably greater benefit-cost ratio and payback period for temporary structures. Regarding
the promotion and adoption of various forms of protected structures, the study's conclusions
will have an impact on farmers, suppliers of building materials, and legislators.
1.4.1 Research Gap
There have been prior investigations of the stock price behavior practices of different
financial companies and banks. Nonetheless, the impact of profitability on the market price of
Nepali development banks' shares has been taken into consideration when conducting this
study. This study aims to determine the behavior of stock prices and how it affects stock
prices with regard to four development banks. The results of the earlier study revealed the
secondary fluctuations in the stock prices of the individual companies as well as the
preferences expressed by investors while purchasing and disposing of shares.
1.5 Research Methodology
1.5.1 Research Design
For this study, a descriptive and informal research design will be employed. The impact of
EPS, DPS, NWPS, and P/E ratio on market price will be described using a descriptive study
approach based on tables, graphs, and figures with simple computations of the currently
gathered data. Analytical study design will also be employed to analyze the sampled banks'
standard deviation, correlation coefficient, and regression analysis.

1.5.2 Sources of Data

We will get the relevant data and information from secondary sources. The NEPSE, SEBON,
and sampled banks' annual reports, trading reports, and publications will be the sources of the
data. Additional information about the NRB, relevant websites, and national and international
periodicals.

1.5.3 Population and Sample

The stock market is divided into several different areas, including banking, development
banks, trading, manufacturing and processing, hydropower, and others. The population of this
study will consist of the 18 development banks that are listed on NEPSE. Four of the total
eighteen development banks will be selected as a sample using the purposive sampling
 10

technique in order to reflect the performance of the capital market. Lumbini Bikas Bank
Limited (LBBL), Shangrila Bikas Bank Limited (SHBBL), Jyoti Bikas Bank Limited
(JBBL), and Garima Bikas Bank Limited (GBBL) are the sample banks. These banks are
chosen based on their profit margin and their ten years' worth of annual data is publicly
accessible, making them suitable for use as sample banks.

1.5.4 Data Collection Procedure

The majority of the information required for the study will come from secondary sources.
Information about share prices, market capitalization, and NEPSE index volatility, among
other things, was extracted from the trading report that NEPSE released. From the firms,
additional information on related companies was also obtained.
1.5.5 Research Framework and Definitions of Variables
A research framework is a versatile analytical instrument that may be used in a variety of
situations. It is employed to arrange concepts and draw conceptual distinctions. Robust
frameworks effectively convey a meaningful idea in a form that is simple to recall and
implement. Market price is considered a dependent variable, while dividends, earnings, price-
earnings ratios, and net worth are considered independent variables. Figure displays the
research framework, which explains the independent and dependent variables employed in
the study.

Independent Variables
Dividend per share (DPS)
Dependent Variables
Earnings per Share (EPS)  Market Value Per
Price Earnings Ratio (PE Ratio) Share MVPS)
Net Worth per Share or Book Value per
Share (BVPS)

Figure 1 Research Framework

(Source: Wijerathna 2018)
The figure 1 shows that independent variable DPS, EPS, P/E Ratio and BWPS used in this
study to measure its impact on market price per share. Market price per share used as
dependent variable (Wijerathna 2018).
 11

Market Value per Share (MVPS)

The market's supply and demand determine this value. Market value is the result of the
discussion between the seller and the investor and is based on supply and demand. Many
factors, including the state of the economy and sector, anticipated earnings and dividends,
speculative activity, and other signaling effects like significant national events, government
stability, all have an impact on the market value (Wijerathna 2018).
Total Market Capitalization
MPS =
No. of Shares Outstanding

Dividend per Share (DPS)

The total declared dividends for each issued ordinary share is known as the dividend per
share. Divided by the total number of outstanding shares issued, it represents the total
dividends distributed to shareholders for a given year. For the purposes of this analysis, each
company's declared cash and stock dividends have been taken into consideration. It is one of
the study's independent variables.
Total Dividend Paid
DPS =

No. of Shares Outstanding

Earnings per Share (EPS)

The amount of a company's profit allotted to each outstanding share of common stock is
known as earnings per share. It is among the determinants of a business's profitability.
Greater profitability and improved fund mobilization by financial institutions are both
indicated by higher earnings and vice versa. The study's independent variable is EPS.
Total Earning
EPS =

No. of Shares Outstanding

Price Earnings Ratio (P/E ratio)
The price-earnings ratio looks at how much a company's stock is currently worth in relation
to its earnings. It also represents what investors anticipate will happen to the company's
earnings over time, which has an impact on the stock price. In this study, it serves as an
independent variable as well.
MVPS PE
ratio = EPS
 12

Net Worth per Share or Book Value per Share (BVPS)

The true worth of the business is reflected in the NWPS. It is the simple division of the
number of outstanding shares by the net worth (share capital plus retained earnings/genera
reserve). It is one of the study's independent variables as well.
Net Worth
BVPS =

No. of Shares Outstanding

1.5.6 Method of Analysis
It contains all of the gathered data as well as an explanation of it. The market price of the
chosen companies' shares, earnings and dividends paid, net worth, PE ratio, market price,
NEPSE index, and numerous other relevant keywords were all provided and examined in the
study.

a. Descriptive Analysis
Brief informational coefficients known as descriptive statistics are used to provide an
overview of a specific data collection, which may be a sample or a representative of the full
population. Measurements of central tendency and measurements of variability (spread) are
the two categories into which descriptive statistics fall. The standard deviation, variance,
minimum and maximum variables, kurtosis, and skewness are measurements of variability,
whereas the mean, median, and mode are measures of central tendency.

b. Correlation Analysis
The statistical method used to characterize how closely one variable is related to another
linearly is correlation analysis (Levin & David, 1994: 613). It is helpful for determining how
strongly and how much a linear relationship there is between two variables. A positive
correlation is one when there is a direct proportionality between the variables' values.
Conversely, in the event where the variables' values exhibit inverse proportionality, the
correlation is considered negative; yet, the correlation coefficient consistently stays within the
range of +1 to -1. The formula that follows can be used to find the correlation coefficients (r)
between two versions, x and y.

nxy – xy
 13

Correlation Coefficient (r) = nx2 – (x)2 ny2 – (y)2

Where,
r = coefficient of correlation
ΣXY = Sum of product of two series.
ΣX2 = Sum of squared in X series ΣY2 = Sum
of squared in Y series n = number of years
The value of this coefficient can never be more than + 1 or less than -1. Thus, + 1 and -1 are
the limit of this coefficient. The value of r = + 1 implies the correlation between variables is
positive and vice- versa. And zero denoted no correlation.

c. Regression Analysis
A collection of statistical techniques called regression analysis is used to estimate the
associations between a dependent variable and one or more independent variables. It can be
used to simulate the future relationship between variables and evaluate how strongly the
variables are related to one another. It can be express in following Equation:
Y = β0+ β1X1+ β2X2+ β3X3 + β4X4 +……+e
MVPS = a + β1DPS + β2 EPS + β3 PE + β4 BVPS +e
Where,
Y (MVPS) = Dependent Variables a = Intercept or Average β1, β2…. = Slope of Independent
variables e = Error
1.6. Limitations of the Study
No study is free of limitations, so as this study does have its own limitations. The following
will be the limitations of this study:

 The study will be mainly concentrated on the market price volatility of Nepalese
development banks. Only four development banks out of 18 development banks will
be selected via purposive sampling method.
 This study will include the observation period of 10 years from FY 2013/14 to FY
2022/23 of four development banks.
 The dependent variable, market price per share will be used in this study and will be
computed only in the basis of the average price of stock in a year.
 The data will be taken from secondary source; therefore, authenticity of the data is
dependent on the accuracy of the information used.
 14

 The result will be strictly based on information provided by the company's website,
SEBON, NEPSE, NRB etc. ([Link]).
 15

CHAPTER – II
RESULTS AND ANALYSIS

In this chapter, the data are carefully presented and analyzed. These additional details were
found only in yearly reports. This chapter presents, assesses, and interprets the collected
data in accordance with the study methodology discussed in the third chapter. Relevant
data and information about development banks' share price behavior are provided and
contrasted.

The chapter begins with a descriptive examination of the market per share, earnings per
share, dividend yield, price earnings ratio, BVPS, and earnings per share of the sample
insurance businesses. This is followed by an explanatory and hypothetical analysis. Both
statistical methods are applied to compare the financial variables. This chapter concludes
with correlation and regression analysis of the sample development banks and a structured
tabulated presentation of the findings.

2.1 Descriptive Statistics of Variables

Table 1 displays the descriptive statistics for the variables utilized in the investigation.
Together with additional independent variables (market value per share, earnings per share,
dividend per share, dividend yield, and price-earnings ratio of development banks in
Nepal), the result demonstrates the lowest and maximum performance of market value per
share.
Table 1
Descriptive Statistics of Variable of Development banks

Variables Minimum Maximum Mean Std. Deviation

Dependent Variables
Market value per Share 124 4351 1475.42 1058.18
Independent Variables
Dividend per Share .00 78.40 27.2704 23.36919
Earnings per Share 10.11 100.81 29.6553 21.35969
BVPS 126.00 250.83 168.7560 38.78566
Price Earnings Ratio 10.11 100.81 48.9907 25.63025
Source:Annual Report of selected Development banks
 16

Table 1 presents a descriptive statistics table for Jyoti Bikas Bank Limited, Garima Bikas
Bank Limited, Shangrila Bikas Bank Limited, and Lumbini Bikas Bank Limited, covering
ten years from 2013/14 to 2022/23. The table covers five factors related to profitability
and market share performance: earnings per share (EPS), dividend per share (DPS), price
earnings ratio (PER), earnings per share (BVPS), and market value per share (MVPS). The
average value of each variable is denoted by the term "Mean", with the highest value
recorded at 4351 for the four chosen development banks. The minimum value is the lowest
value observed at 124. The standard deviation measures the dispersion of data points
around the mean, with a MVPS standard deviation of 1058.18 indicating a reasonable
range of values.
2.2 Correlation Analysis
A table displaying correlation coefficients between variables is called a correlation matrix.
The correlation between corresponding variables is displayed in each cell of the table. Data
can be summarized using a correlation matrix. This gives us a quick overview of the
variables that correlate at different strengths and levels of significance. When two variables
have a correlation value of zero, it means that there is no linear relationship between them.
The correlation coefficient goes from +1 (perfect positive link) to -1 (perfect negative
relationship). Correlation matrix is presented as following in Table 2.

Table 2
Correlation Coefficients of Study Variables
DPS EPS BVPS PER
Variables 1 MVPS
Dividend Per Share
Sig. (2-tailed)
Earnings Per Share .591* 1
Sig. (2-tailed) .020
BVPS .573* .222 1
Sig. (2-tailed) .026 .427
Price Earnings Ratio .483 .553* -.019 1
Sig. (2-tailed) .068 .032 .947
MVPS .795** .573* .332 .605* 1
Sig. (2-tailed) .000 .025 .227 .017

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).
 17

Source: SPSS Output

The correlation test employing a correlation coefficient matrix is shown in Table 3 for both
dependent and independent variables. At the 0.05 and 0.01 level of significance, the
correlation test reveals a substantial positive relationship between dividend per share (DPS)
and EPS, BVPS, and MVPS. Additionally, there is a strong positive correlation between
EPS and both PER and MVPS. Then, the relationship between BVPS and other factors is
marginally positive. On the other hand, there is a strong positive correlation between
MVPS and price earnings ratio.
2.3 Regression Analysis
This section examines the link between the dependent variable, market value per share
(MVPS), and the independent variables, earnings per share (EPS), dividend per share
(DPS), price earnings ratio (PER), and book value per share (BVPS).
Table 3
Model Summary of MVPS

Std. Error of the

Model R R Square Adjusted R Square Estimate
1 .837a .701 .534 .53833
a. Predictors: (Constant), EPS, DPS, PER, BVPS
b. Dependent Variable: MVPS
Source: SPSS Output

Here, R2 represent the percentage of the variability of stock that can be explained by
independent variables. The value of R 2 (coefficient of determination) is 0.701 which
represents 70.01% variation in MVPS has been explained by RPS, DPS, PER and BVPS..

Table 4
ANOVA
Model Sum of Squares Df Mean Square F Sig.
1 Regression 6.105 5 1.221 4.214 .030b
Residual 2.608 9 .290
Total 8.714 14
a. Dependent Variable: MVPS
b. Predictors: (Constant), EPS, DPS, PER, BVPS
Source: SPSS Output
 18

The overall summary and significance of the independent and dependent variables are
displayed in the ANOVA table. This table shows that, at significance level 0.05, or 0.030,
the relationship between the independent variables EPS, DPS, PER, BVPS, and DY and
the dependent variable, MVPS, is statistically significant. To determine whether there is a
significant relationship between these variables, the calculated p-value must be less than
the 5% significance level.
Table 5
Regression Coefficients
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .664 .887 .749 .473
DPS .023 .010 .684 2.282 .048
EPS .002 .009 .044 .181 .860
BVPS -.001 .005 -.053 -.207 .841
PER .008 .008 .256 1.030 .330

a. Dependent Variable: MVPS

Source: SPSS Output

The linear equation of this model is,

Y = a + b1x1+b2x2+b3x3+b4x4
MVPS = 0.664 + 0.023 DPS + 0.002 EPS – 0.001 BVPS – 0.118 DY + 0.008 PER
The estimated regression results for DPS, EPS, BVPS, DY, and PER on MVPS are
displayed in Table 4. The negative coefficients of DY and BVPS show that MVPS falls by
0.001 and 0.118, respectively, for every Rs. 1 increase in DY and BVPS. It suggests that
the MVPS of Nepalese development banks would be lower the higher the DY and BVPS.
The DPS, EPS, and PER beta coefficients are all positive. It suggests that the stock price of
development banks would increase in proportion to increasing DPS, EPS, and PER.

70.10%, or 0.701, is the coefficient of determination (r 2). As can be seen in the above table,
the independent variable DPS has a p-value of 0.048 at the significance level 0.05, making
it statistically significant. The p-values of EPS, BVPS, DY, and PER, on the other hand,
are bigger than the significance level even at 0.10, indicating that they are not statistically
 19

significant. The significance threshold of 0.05 means that while the overall model is
significant, each independent variable is not.

2.4 Major Findings

Since examining the relation between EPS, DPS, BVPS, PER, and MVPS is one of the
study's primary goals. The development banks' EPS, DPS, PER, and MVPS are all
positively correlated.
 MVPS and DPS have a significant positive relationship, with BVPS statistically
insignificant.
 EPS and PER are both positively significant, suggesting skillful management of
overall circumstances.
 EPS, PER, and DPS have little overall effect on MVPS.
 Market price of a share is significantly impacted by EPS, PE ratio, and DY.
 DY and DPS have positive but negligible effects on market price, aligning with
Tiwari's study (2022).
 From 2013/14 to 2022–23, market price per share of insurance will be positively
but marginally impacted by these factors.
 There is a positive correlation between market value per share and DPS, EPS,
BVPS, and PER.
 DPS has a strong positive association with EPS but a negligible negative link with
PER.
 PER has a significant positive and statistically significant relationship with MVPS.
 The negative coefficient of DY shows that MVPS falls when DY increases by Rs.
1, suggesting a decrease in stock price.
 The beta coefficients of EPS, PER, and DPS are positive, suggesting an increase in
stock price of development banks.
 20

CHAPTER –III
SUMMARY AND CONCLUSION
3.1 Summary
This study aims to evaluate the market value per share (MVPS), dividend yield, price
earnings ratio, and earnings per share of development banks in Nepal. It examines the
relationship between these factors and their impact on MVPS. The research employs
descriptive and causal comparison methods to analyze the current state of dividend
practices. The study includes all 17 development banks in Nepal, with Jyoti Bikas Bank
Limited, Garima Bikas Bank Limited, Shangrila Bikas Bank Limited, and Lumbini Bikas
Bank Limited being the only four banks included in the sample.
The stock market serves as a low-cost means for developing businesses to raise cash,
stimulate economic growth, and provide a regulated share market. The study is structured
into five chapters, covering the primary topic, the general context, the sample development
banks, the problem statement, the objectives, the significance of the study, and the study's
limitations.

The third chapter discusses the research approach, including statistical tools, research
design, data source, analysis methodology, and financial indicators and variables. The
fourth chapter uses statistical methods to present and analyze data, demonstrating a
significant positive relationship between dividend per share (DPS) and EPS, BVPS, and
MVPS through correlation and regression. The fifth chapter concludes with a summary,
conclusion, and recommendations, comparing them with other empirical evidence and
providing suggestions.

3.2 Conclusion
The study reveals that market value per share in Nepal is significantly influenced by EPS,
DPS, and PER. Daily stock price observations of development banks show that some
banks have constant variations, while others have little variation. This results in inefficient
stock market pricing. The runs test also highlights the importance of the percentage
difference between observed and real number of runs in price changes.
Dividend per share and other variables have changed, as dividend yield is not more stable
than dividend yield. The independent variable accounts for 61.70% of the Market Value
per Share (MVPS), with a positive correlation between DPS and PER. The capital market
 21

in Nepal is extremely erratic, with no many disparities in the BVPS of Nepalese

development banks.
DPS, PER, and EPS have positive relationships with market value per share, suggesting
that the stock price of Nepalese development banks would increase in proportion to
increasing DPS and EPS. A negative correlation between market value per share and PER
suggests that a rise in DPS causes a fall in stock price. The stock price of Nepalese
development banks would increase in proportion to increasing EPS, PER, and DPS, as
indicated by the coefficient of determination (r).

3.3 Recommendation
Based on the observation of the MVPS with DPS and another variable of selected
development banks, as well as the empirical perspective of the impact of dividends on
share price by financial performance, the recommendation has been made. We suggest the
following.
 A documented strategic dividend policy should be in place for every corporation,
approved by the Supervisory Board or General Meeting before public release.
 The DPS analysis reveals inconsistent dividend policy across all sample development
banks.
 Companies must find a reasonable DPS annually to foster a positive attitude among
investors and shareholders.
 Variations in DY, MVPS, EPS, and DPS must be managed to maintain consistency.
 The company's dividend payout policies are inconsistent, making it difficult to
determine a share's true market value.
 Long-term goals for profits and dividend payments should be established to meet the
competitive environment's demands.
 The dividend policy should provide clear direction for implementing the dividend
distribution plan, including a low regular plus extra dividend policy, a constant payout
policy, or a stable dividend policy.
 The dividend policy should aim to give shareholders a fair return on equity due to the
increase in share value and/or dividend payments.
 The company's dividend policy should align with regulatory and supervisory
authorities' recommendations from the NRB, focusing on energy security and
financial stability.
 22

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 APPENDICES
Appendix I
Cross Sectional Panel Data of Sample Development Banks
BVPS EPS DPS PER MVPS
143.18 18.89 0 -2.65 50
170.64 -33.46 0 -3.2 107
144.37 17.27 0 8.97 155
153.67 17.24 0 8.82 152
132.65 8.71 0 8.95 77.99
250.83 15.19 17.07 9.61 146
220 28.38 5 6.94 197
166 13.94 7 12.99 181
128 14.93 13 39.18 585
135 19.4 3 17.58 341
126.00 40.01 27.5 6.6 264
185.00 41.32 40 15.25 630
231.00 35.99 32.63 15.25 564
180.00 43.1 34 30.32 1307
165.00 32.09 21.05 30.26 971
141.18 20.45 22.63 18.48 378
128.64 27.94 17.6 13.24 370
174.28 16.56 11.25 18.84 312
157.21 24.03 17.58 27.34 657
121.38 23.72 13.5 18.55 439.9
151.11 33.92 33.81 4.33 147
104.71 11.57 21.3 12.7 147
119.28 24.19 20.85 12.98 314
132.11 22.06 16.92 19.27 425
144.57 25.6 20.69 15.23 390
184.29 12.18 9.45 12.89 157
177.34 13.11 8.96 12.12 159
152.14 7.33 5.26 19.23 141
118.19 14.98 10.53 28.3 424
114.64 17.51 8.534 21.53 290
14.21 35.56 0.00 19.32 165
14.63 30.87 0.00 21.21 182
10.53 13.99 0.00 8.97 155
22 24.17 0.00 8.82 152
18.79 21.49 0.00 8.95 77.99
70.53 32.44 17.07 9.61 146
48.5 20 20 6.94 197
51 24 10 12.99 181
14.74 15 13.68 39.18 585
15.62 24 12 17.58 341
Source: Annual report of selected development banks

Appendix II
DPS EPS BVPS PER
1 MVPS

.591* .020 1
.573*
Dividend Per Share
.026 .222 1
Sig. (2-tailed)
.483 .427
Earnings Per Share
.068 .553* .03 -.019 1
Sig. (2-tailed)
.795** 2 .947
BVPS
.000 .573* .332 .605*
Sig. (2-tailed)
.025 .227 .017
Price Earnings Ratio
Sig. (2-tailed)
MVPS 1
Sig. (2-tailed)
Correlation Analysis
Source: SPSS Output

Appendix- III
Regression Analysis
Model Summary

Std. Error of the

Model R R Square Adjusted R Square Estimate
1 .837a .701 .534 .53833
a. Pre
dictors: (Constant), EPS, DPS, PER, BVPS
b. Dependent Variable: MVPS
Source: SPSS Output

ANOVA

Model Sum of Squares Df Mean Square F Sig.

1 Regression 6.105 5 1.221 4.214 .030b
 Residual 2.608 9 .290
Total 8.714 14
a. Dependent Variable: MVPS
b. Predictors: (Constant), EPS, DPS, PER, BVPS
Source: SPSS Output

Regression Coefficients
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .664 .887 .749 .473
DPS .023 .010 .684 2.282 .048
EPS .002 .009 .044 .181 .860
BVPS -.001 .005 -.053 -.207 .841
PER .008 .008 .256 1.030 .330
a. Dependent Variable: MVPS
Source: SPSS Output