DETERMINANTS OF STOCK MARKET PRICE IN NEPAL

A PROJECT WORK REPORT

Prepared By:

Submitted By:
Name
TU Reg. No.
Exam Roll No.
Group : Finance
MULTIPLE CAMPUS

Submitted To:
Office of Dean
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

Bachelor of Business Studies (BBS)

Nepal
July, 2024
 Declaration
I hereby declare that the project work entitled A Study on cash Flow Analysis of Joyti
Bikash Bank Limited submitted to The Faculty of The Management Tribhuvan University,
Kathmandu is an original piece of work under the supervision of Multiple Campus, … and
is submitted in partial fulfillment of the requirements for the award of the degree of Bachelor
of 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.

………………
Date:

ii
 Supervisor's Recommendation

The project work report entitled A Study on cash Flow Analysis of Joyti Bikash Bank
Limited Submitted by of Multiple Campus is prepare 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 award of the degree of Bachelor
of Business Studies (BBS). I, therefore, recommend the project work report for evaluation.

…………………………..t
Date:

iii
 Endorsement

We here by endorse the project work report entitled A Study on cash Flow Analysis of Joyti
Bikash Bank Limited Submitted by …. of ….Multiple Campus, in partial fulfillment of
the requirements for award of the Bachelor of Business Studies (BBS) for external
evaluation.

…………………….. ....….… …………………………

Chairperson, Management Campus Chief
Research Committee
Date: …………… Date: ……………..

iv
 Acknowledgement

The project report entitled A Study on cash Flow Analysis of Joyti Bikash Bank Limited
has been completed for the partial fulfillment of the requirements for the degree of Bachelor
of Business Studies (BBS), Tribhuvan University.
It is my immense pleasure to complete this research work. I got the opportunity to visit
different sites and organizations that are working in the field of my project area. It developed
the research skill as well as interpersonal and communication skills through the interface with
the people working in. So, I would like to thank faculty of management, Tribhuvan
University for providing such a wonderful opportunity.
The credit for successful completion of this work goes to multiple hands and minds that
supported me during the course of conducting researcher. First of all I would like to thank to
my supervisor ….., for the guidance and supervising my report. I would also like to thank to
the chairman of management research committee …. . Especially, campus chief …. and the
whole team of ……Multiple Campus.
I would also like to extend my heartfelt appreciation to all official personnel of sample
organization who provide me required document, information, data and guidelines. I am
equally thankful to the respondents, who provided actual information regarding the project
without which the study could not be completed with the higher degree of reliability and
validity.
At the last, but not least, I would like to thank my parents as well as friends for their
consistent support, encouragement and unconditional love to me for the accomplishment of
goal.

Thankfully,

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 Table of Content

Title Page…………………………………………………………………………………………………i
Declaration………………………………………………………………………………………………ii
Supervisor’s Recommendation………………………………………...……….…………………….iii
Endorsement…………………………………………………………………..…………………….….iv
Acknowledgement…………………………………………………………….………………………...v
Table of Content………..………………………………………………….………………..…………vi
List of Tables……………….……………………………………………..…………………………..viii
List of Figures ……………………………………………………………………………ix
List of Abbreviations …………………………………………………………………………x
CHAPTER I ……………………………………………………………………………………………..1
INTRODUCTION ………………………………………………………………………………………1
1.1 Background of Study.......................................................................................……………1
1.2 Organization profile.............................................................................................................2
1.2.1 Introduction to Commercial Bank………………………………………………………..2

1.2.3 Introduction to Hydropower ……………………………………………………………4

1.2.4 Introduction to Telecom Company ………………………………………………………4

1.2.5 Introduction to Development Banks ……………………………………………………5

1.3 Objectives of the Study........................................................................................................5

1.4 Rationale of the Study..........................................................................................................5
1.5 Literature Review.................................................................................................................6
1.5.1 Conceptual Review…………………………………………………………………………6

1.5.2 Empirical
Review…………………………………………………………………………...7

1.6 Research Methodology........................................................................................................8

1.6.1 Research Design…………………………………………………………………………….8

1.6.2 Nature and sources of data ………………………………………………………………8

1.6.3 Population and sample ……………………………………………………………………8

1.5.4 Data Analysis Tools………………………………………………………………………..9

1.6.5 Hypotheses Formulation …………………………………………………………………10

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 1.6.6 Theoretical Framework …………………………………………………………………11

1.7 Limitation of the study.......................................................................................................11

CHAPTER II……………………………………………………………………………………………12
DATA PRESENTATION AND
ANALYSIS……………………………………………………...12
2.1 Data Presentation...............................................................................................................12
2.2 Data Analysis of Descriptive Statistics of Study Variables...............................................16
2.3 Descriptive Analysis..........................................................................................................17
2.4 Major Findings...................................................................................................................20
CHAPTER III…………………………………………………………………………………………..21
SUMMARY AND CONCLUSION…………………………………………………………………21
3.1 Summary............................................................................................................................21
3.2 Conclusion.........................................................................................................................21
REFERENCES…………………………………………………………………………………………22

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 List of Tables
Table 1 Name of sample Companies 9
Table 2 Data analysis of Weighted Average Stock Price 12
Table 3 Data analysis of EPS of NABIL, GBIME, CBBL, BPCL, NTC and JBBL 13
Table 4 Data analysis of DPS of NABIL, GBIME, CBBL, BPCL, NTC and JBBL 14
Table 5 Data analysis of P/E Ratio of NABIL, GBIME, CBBL, BPCL, NTC and JBBL 15
Table 6 Data analysis of Book Value of NABIL, GBIME, CBBL, BPCL, NTC, JBBL 16
Table 7 Descriptive Statistics 16
Table 8 Pearson Correlation analysis between variables 17
Table 9 ANOVA 18
Table 10 Regression Analysis 18

viii
 List of Figures
Figure 1.1 Theoretical Framework 11

ix
 List of Abbreviations
Acronym
NEPSE Nepal Stock Exchange

EPS Earnings per Share

DPS Dividend per Share

BV Book Value

P/E Price to Earning

OTC Over the Counter

SEBON Securities Board of Nepal

GBIME Global IME Bank Limited

BPCL Butwal Power Company Limited

CBBL Chimmek Laghubitta Sanstha Limited

NTC Nepal Doorsanchar Company Limited

NASDAQ National Association of Securities Dealers Automated Quotations
exchange
NRB Nepal Rastra Bank

x
 CHAPTER I
INTRODUCTION
1.1 Background of Study

Stock Market is a place where shares of pubic listed companies are traded (James Chen,
2022). The parties involved in securities market are investors, institutional investors (mutual
funds, insurance companies, pension funds, banks) etc. It refers to the collection of markets
and exchanges where regular activities of buying, selling, and issuance of shares of publicly-
held companies take place. It is the mirror of economy. It has become an essential market
playing a vital role in economic prosperity that fostering capital formation and sustainable
economic growth (Acharya S. 2015).
Stock price refers to the cost of purchasing a security on an exchange (Aryal, M. 1995). Stock
prices can be affected by a number of things including volatility in the market, current
economic conditions, and popularity of the company. The stock market refers to the
collection of markets and exchanges where regular activities of buying, selling and issuance
of shares of publicly-held companies take place. Such financial activities are conducted
through institutionalized formal exchanges or over the-counter (OTC) marketplaces which
operate under a defined set of regulations.
The capital market consists of two types of market. They are: primary and secondary market.
The primary market is where companies float shares to the general public in an initial public
offering (IPO) to raise capital (James Chen, 2022). Corporations, national and local
governments and other public institutions gets financing through the sale of new stocks and
bond issues through primary market whereas secondary market is a marketplace where
already issued securities both shares and debt can be bought and sold by the investors. It is
the market where investors buy securities from another investor, not from issuing company.
Stock Market such as New York Stock Exchange (NYSE), London Stock Exchange (LSE),
NASDAQ are some of the popular examples of Secondary market. In the context of Nepal,
Nepal Stock Exchange (NEPSE) is only the stock exchange market.
The Nepal Stock Exchange Limited (abbreviated as NEPSE) is located in Singha Durbar
Plaza,Kathmandu. The history of Capital Market in Nepal is not too long. It started since the
period of Rana Prime Minister JuddhaShumsher with the IPO issue of Biratnagar Jute Mills
in 1937 AD (Bajracharya, Pushkar 1995).
Securities Exchange Center was established in 1976 AD. with an objective of facilitating and
promoting the growth of capital, later converted into Nepal Stock Exchange. NEPSE opened
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its trading floor on 13 Marchuary 1994 AD. As of November 4, 2020, the equity market
capitalization of the companies listed on NEPSE was approximately US$230.35 billion. The
Exchange has 50 registered brokers who operate on the trading floor as per the Securities
Act-2007, rules and byelaws. The broker house and its branches are expanded over 21
different cities of Nepal.There are 374 companies listed on stock exchange, till the date (as on
04-11-2020) out of which 178 are currently active, till the date (as on 18-01-2022), which
includes Commercial Banks, Hotels, Hydro Power Companies, Insurance Companies, Mutual
Funds, Finance Companies and others. It is regulated by Securities Board of Nepal (SEBON).
NEPSE started trading at secondary market from 100 point onMarch. 1994. The lowest point
of indices is 293 and as of March2022, NEPSE index point is at its all-time high.
The present study deals with an attempt to analyze the impact of EPS, DPS, P/E ratio and
Book Value on share price of companies on the basis of financial statements information in
Nepalese context. The objective of this study is to examine the impact of the internal factor
on the stock prices of Nepalese companies listed in NEPSE.
1.2 Organization profile

1.2.1 Introduction to Commercial Bank

The term commercial bank refers to a financial institution that accepts deposits, offers
checking account services, makes various loans, and offers basic financial products like
certificates of deposit (CDs) and savings accounts to individuals and small businesses.
1.2.1.1 Nabil Bank Limited (NABIL)
Nabil Bank Limited is the nation’s first private sector bank, commencing its business since
July 1984. Nabil was incorporated with the objective of extending international standard
modern banking services to various sectors of the society.
Nabil, as a pioneer in introducing many innovative products and marketing concepts in the
domestic banking sector, represents a milestone in the banking history of Nepal as it started
an era of modern banking with customer satisfaction measured as a focal objective while
doing business. Operations of the bank including day-to-day operations and risk management
are managed by highly qualified and experienced management team. Bank is fully equipped
with modern technology which includes international standard banking software that supports
the E-channels and E-transactions.
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1.2.1.2 Global IME Bank Ltd. (GBIME)

Global IME Bank Ltd. (GIBL) emerged after successful merger of Global Bank Ltd (an “A”
class commercial bank), IME Financial Institution (a “C” class finance company) and Lord
Buddha
Finance Ltd. (a “C” class finance company) in year 2012. Two more “B” class development
banks
(Social Development Bank and GulmiBikas Bank) merged with Global IME Bank Ltd in
year 2013. Later, in the year 2014, Global IME Bank made another merger with Commerz
and Trust
Bank Nepal Ltd. (an “A” class commercial bank). During 2015-16, Global IME Bank
Limited acquired Pacific Development Bank Limited (a "B" Class Development Bank) and
Reliable Development Bank Limited (a "B" Class Development Bank). During 2019-20,
Global IME Bank Limited acquired Hathway Finance Limited (a “C” class finance company)
and merged with Marchata Bank Nepal Limited (an “A” class commercial bank).
GIBL has been conferred with “The Bank of the Year Award 2014” for Nepal by the Bankers
Magazine (Publication of the Financial Times, UK), “Best Internet Bank 2016- Nepal” by
International Finance Magazine, London and “Best Employer Award 2018” by World HRD
Congress, India.
Microfinance is a financial service aimed at low-income individuals or at those who do not
have direct access to typical banking services. Microfinance encompasses a number of
financial services like micro-credit, micro-lending, micro-insurance, savings and money
transfer among others. A microfinance institution (MFI) provides financial services to the
communities who cannot offer collateral against the loans they take but have skills and desire
to undertake economic activities for generating income and self-employment. MFIs range
from small non-profit organizations to commercial banks.
1.2.2 Chimmek Laghubitta Bikash Bank Limited (CBBL)
Incorporated in December 2001, Chhimek Laghubitta Bittiya Sanstha Ltd (CBBL) received a
micro-finance banking license from the Nepal Rastra Bank Marchuary 2002. CBBL is an
offshoot of the micro-finance operation implemented by Neighborhood Society Service
Centre (NSSC), a national level NGO, since the ‘90s in Mahottari and Chitwan in central
Nepal.
Chhimek has an overarching aim to improve access to financial services of the poor and
marginalized women members. It strives to promote a culture of saving, encourages income
 4

generation, supports micro-enterprises development and provides social security services to

its member.
By the end of 2019, Chhimek had reached out to more than 370,000 poor and marginalized
women clients in 68 districts through 136 branches across Nepal. Starting with a small paid-
up capital of NRs 10 million, Chhimek’s core fund has increased nearly 150 times by the end
of 2019.
1.2.3 Introduction to Hydropower

1.2.3.1 Butwal Power Company Limited (BPCL)

Butwal Power Company (BPCL) is one of the leading companies in Nepal’s power sector
with generation and distribution as its core business areas. Incorporated in 1966 as private
company and converted into public limited company in 1993, BPC has a track record of
pioneering multi- faceted capacity building initiatives in hydropower development.
Pursuing the privatization process, in 2003, the Government of Nepal handed over majority
ownership and management control to private investors on public-private partnership model.
BPC is registered with the Securities Board of Nepal and listed in Nepal Stock Exchange
Limited. Starting off with electrification plan of a small city in the south of central Nepal,
BPC is the only enterprise which can look back to a five-decade long history of success,
sustained growth and capacity building in the country.
There are 93 promoters of the company: 2 institutional and the remaining 91 individual
promoters.
Among the institutional promoters, there are prominent finance and development banks of
Nepal.
1.2.4 Introduction to Telecom Company

The telecommunications sector consists of companies that transmit data in words, voice,
audio, or video across the globe, whether it is through the phone or the Internet, through
airwaves or cables, through wires or wirelessly. These companies created the infrastructure
that allows data in words, voice, audio or video to be sent anywhere in the world. The largest
companies in the sector are telephone (both wired and wireless) operators,satellite companies,
cable companies, and internet service providers.
1.2.4.1 Nepal Doorsanchar Company Limited (NTC)
Nepal Doorsanchar Company Ltd. popularly known as Nepal Telecom or NTC is a state-
owned telecommunication service provider in Nepal with 91.49% of the government share.
The company was a monopoly until 2003, when the first private sector operator United
 5

Telecom Limited (UTL) started providing basic telephony services. The central office of
Nepal Telecom is located at Bhadrakali Plaza, Kathmandu. It has branches, exchanges and
other offices in 184 locations within the country.
1.2.5 Introduction to Development Banks

Development banks are financial institutions established to lend (loan) finance (money) on
the subsidized interest rate. Such lending is sanctioned to promote and develop important
sectors like agriculture, industry, import-export, housing, and allied activities.
1.2.5.1 Jyoti Bikash Bank Limited (JBBL)
Jyoti Bikash Bank Limited is a national level development bank engaged in commercial
banking activity with category "Kha" license from Nepal Rastra Bank. Tbank had an original
focused vision of promoting hydropower sector through lending credit facilities to potential
hydro projects. Continuously assessing the needs of the common citizens and economy of the
country on the whole, the Bank has by now established itself as a financial institution catering
to a large segment of the society with the cause of the citizens' needs at the center.
With the growing economy and a change in the demographic mix, more and more people are
getting engaged into commercial and financial activities and the need of credit and other
banking facilities has been on a tremendous rise. From personal financial needs to the
financial needs of small and medium size businesses to the needs of big corporates, the Bank
has been at the forefront of supporting the national goal of bringing about prosperity in the
lives of the citizens.

1.3 Objectives of the Study

The main aim of this research is to find out the determinants of stock price of various sectors
like Commercial banks, Hydropower, Microfinance and Development banks in Nepal. Some
of the objectives of this study are as follows:
• To examine the impact of EPS on stock price of the company.
• To analyze the impact of DPS on stock price of the company.
• To examine the impact of P/E Ratio on stock price of the company.
• To investigate the impact of Book Value on stock price of the company.
1.4 Rationale of the Study

Stock market is an important part of the economy of a country. The stock market plays a vital
role in the growth of the industry and commerce of the country that eventually affects the
economy of the country to a great extent. That is reason that the government, industry and
 6

even the central banks of the country keep a close watch on the happenings of the stock
market. The stock market is important from both the industry’s point of view as well as the
investor’s point of view. As stock market being an important aspect of economy, this study
mainly focusses on various factors that affect the stock price movements considering its
history, growth, issues and challenges.
The research has been done by considering the data of NEPSE so this study might be useful
to the university students who have very less knowledge about stock market and are curious
to know about the current status of Nepalese stock market. Similarly, this study might be
reference to other researchers to conduct their study on similar topics.
1.5 Literature Review

1.5.1 Conceptual Review

Mukherjee and Nakla (1995) showed that economic variables influence stock market returns
through their effects on future dividend and discount rates. Most common variables are
interest rates, Fundamental factors like EPS, DPS, P/E Ratio etc., Market Sentiments, Market
cycles & Financial News. Theoretical justifications of these factors are as follows:
Earnings per share (EPS)
Fundamental factors like earnings affects the value of a company. Literature shows that most
of the individual investors take their individual investment decision based on the EPS.
Earnings are the profit a company makes, and in the long run no company can survive
without them. Public companies are required to report their earnings four times a year (once
each quarter). If a company's results surprise (are better than expected), the price jumps up. If
a company's results disappoint (are worse than expected), then the price will fall.
Dividend per share (DPS)
Dividend is the portion of the profit after tax, which is distributed to the shareholders for their
investment bearing risk in the company.This ratio shows the amount payable per share to
equity shareholders. It also sets a benchmark for a meaningful comparison among different
companies. It has significant influence on the market price of the shares as the investors look
after how much dividend a company has distributed per share.
Price to Earnings Ratio (P/E Ratio)
The P/E ratio measures the relationship between a company's stock price and its earnings per
share of stock issued. The P/E ratio is calculated by dividing a company's current stock price
by its earnings per share (EPS). It indicates how much investors are willing to pay for every
dollar of earnings. It offers better insight into the stock's growth potential.
7
 8

Book Value (BV)

It is a measure which shows what you'll get (per share) after selling out all assets (at cost
price) and satisfying all liabilities right now. In short, the difference between asset and
liability is yours. By comparing book value to a stock's price, one can get a sense of whether
investors see its accounting statements as a fair reflection of a company's intrinsic worth.
1.5.2 Empirical Review

Various studies have been done in this this field by using different variables, methodology,
and time span.
Acharya (2018) has conducted a research on ‘The study on Stock Market’. The objective of
this study was to know the market trends of the stock market and the information related to
the investment for future investors. Secondary data were collected through newspapers,
websites and journals. Primary data was collected through Interview.
It was found that market forces like demand and supply of stocks, Earnings, Market
Capitalization affects the stock price of the company.
Thapa (2019) has conducted a research on ‘Influencing Factor of stock price in Nepal’. The
main objective of the paper is to explore the affecting factors of stock price and analyze the
interrelationship among the affecting factors. Secondary data was collected through quarterly
time series data spanning from the 2008 to 2017 AD. Similarly, data were obtained from the
NEPSE, NRB, SEBON and Financial report of listed commercial banks. Correlation and
ANOVA were used for data analysis.
The degree of relationship between the MPS and EPS, DPS, P/E Ratio, Stock Dividend, Cash
Dividend was found to be positive. Likewise, past movement of stock price also affects the
buying behavior of the investors. Political crisis and/or unclear political situations observed
time to time were most responsible for varying volatility of stock price.
Challa and Chalam (2015) has investigated the impact of book value, DPS, EPS, Size of the
firm, Dividend per share, dividend yield, Return on net worth, Price Earnings ratio on the
equity price of listed Companies in BSE.
By employing multiple regression analysis, they found that book value and return on net
worth have significant positive relationship with market share price.
Shrestha and Subedi (2014) have conducted a research on ‘Determinants of Stock Market
Performance in Nepal’. The main aim of this study was to examine the determinants of stock
market performance in Nepal. Quantitative data were used. Secondary data were collected.
 9

Data were collected through articles, websites of Nepal Stock Exchange and other companies
listed in NEPSE. Correlation were used for data analysis.
Inflation and money growth has positive relationship with stock performance of company.
Interest Rate and stock performance has negative relationship.

1.6 Research Methodology

With a view to attaining the overall objectives of the research, the research has been carried
out following the systematic methodology. The section provides a description of the type of
data and with the description of methods and procedures for analyzing data.
1.6.1 Research Design

The research study is constructed through descriptive as well as explanatory designs. The
explanatory design considers reviewing of past journals, annual reports as well as related
schedules and consultation to suffice the qualitative and quantitative information regarding
the stated objectives. Concurrently, descriptive design comprises a unique approach to this
issue by using the multivariate linear regression model to identify the factors that influenced
the stock price of the Nepalese companies to test the theoretical relation between stock price
with variables namely, Earning per share, P/E ratio and their analysis and the practices of
these companies.
1.6.2 Nature and sources of data

This study is based on secondary data. The basic data have been collected from the annual
reports of the selected listed companies. Other supplementary data and information have been
obtained from various sources such as Nepal Rastra Bank, Nepal stock exchange limited,
previous dissertation, research publication, and other relevant websites.
1.6.3 Population and sample

There has been a remarkable development of stock market in Nepal. There are altogether 334
companies listed in NEPSE and out of it 178 companies are actively traded. It will be
lengthy, time-consuming and vague while taking all of these institutions into consideration.
The sampling method has been used to select the companies to study for this research. Two
companies from
Commercial Banks sector and each company from Microfinance, Hydropower, Development
Bank and Telecom have been taken as sample for research.
The companies that have been sampled for the study are as follows-
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Table 1 Name of the sample companies

Sectors Name of companies

Commercial Banks Nabil Bank Ltd. (NABIL)

Global IME Bank Ltd. (GBIME)

Microfinance Chhimek Laghubitta Bikas Bank Limited. (CBBL)

Hydropower Butwal Power Company Ltd. (BPCL)

Telecom Nepal Dorsanchar Telecom Limited (NTC)

Development Bank Jyoti Bikash Bank Ltd (JBBL)

1.5.4 Data Analysis Tools

Statistical tools are used to analyze the relationship between two or more variables and to
find how these variables are related. In this study, following statistical tools are used.
Mean
Arithmetic mean is an average of a given set of data this is divided by the number of
observation/ years. The arithmetic mean (AM) is denoted by X:
Standard Deviation
Standard deviation is the measure of dispersion of a set of data from its mean. It measures the
absolute variability of a distribution; the higher the dispersion or variability, the greater is the
standard deviation and greater will be the magnitude of the deviation of the value from their
mean.
Coefficient of correlation
Correlation is a statistical tool design to measure the degree of association between two or
more variables. In another word, if the changes in one variable affect the changes in another
variable, then the variable is said to be co-related when it is used to measure the relationship
between two variables, then it is called simple correlation. The coefficient of correlation
measures the degree of relationship between two sets of figures. Among the various methods
of finding out the coefficient of correlation, Karl Pearson's method is applied in the study.
The result of coefficient of correlation always lies between +1 and -1. The formula for the
calculation of the coefficient of correlation between X and Y is given below.
The interpretation of calculated value of correlation coefficient by following way -
1. If r = 0, then there is no correlation between variables
2. If r > 0, then there is positive correlation between variables
 11

3. If r < 0, then there is negative relation between variables

4. If r = +1, then there is perfect positive correlation
5. If r = -1, then there is perfect negative correlation
Regression
In statistical analysis, regression is a set of statistical processes for estimating the effect of
independent variable on dependent variable. It helps one understand how the value of
dependent variable changes when any one of the independent variables is changed, while the
other independent variables are held constant.
The simplest form of regression equation with one dependent and one independent variable is
given by: s Y= a + bx ……………. (i)
Where, y= estimated value of dependent variable, a= constant value of dependent variable
(y) when the value of independent variable (x) is zero, b= regression coefficient, and x=
value of independent variable
Similarly, here the dependent variable “stock price” is a function of other independent
variables. The regression model for this study is shown below:
SP= a + β1EPS + β2DPS + β3PR + β4BV + e
Where,
SP= Stock Price
a = constant value of SP
β = regression coefficient
EPS = Earnings Per Share,
DPS = Dividend Per Share,
PR = P/E Ratio, BV = Book Value and e = Standard error.
1.6.5 Hypotheses Formulation

Based on the objectives mentioned above, the following are the hypotheses developed.
• H1: There is significant relationship between EPS and stock price of the company.
• H2: There is significant relationship between DPS and stock price of the company.
• H3: There is significant relationship between P/E Ratio and stock price of the company.
• H4: There is significant relationship between Book Value and stock price of the company.
 12

1.6.6 Theoretical Framework

Independent variables

EPS H1

Dependent Variables
H2
DPS

Stock Price
H3
P/E Ratio

H4
Book Value

Figure1.1Research Framework
The figure 1.1 shows that determinants (EPS, DPS, P/E Ratio, and Book Value) are
independent variables and stock price is dependent variable.

1.7 Limitation of the study

It is not a comprehensive study. There are some limitations of the study. Lack of experiences,
time, limited budget, up to date information are the main limitation of the study. Apart from
this some more limitation is presented below:
• The subject of the study is only few factors that determines the stock price.
• Up to 10 years period data were collected for the analysis purpose starting from Year
2010 to 2020.
• The study covers only the past and present state of stock market in Nepal, hence does not
make any prediction about the future.
• There are many other external factors that affects the stock price like political factors,
investor’s sentiments, macro-economic variables, insider trading etc. But only the four
internal variables are taken into consideration while evaluating the stock prices.
 13

CHAPTER II
DATA PRESENTATION AND ANALYSIS

2.1 Data Presentation

2.2.1 Data Presentation of Stock Price of Commercial Bank, Microfinance,

Hydropower, Telecom and Development Bank
In the table below, weighted average stock price of selected companies is presented. It is the
data taken from the website of Nepal Stock Exchange. The average price of one year of each
stock starting from 1stShrawan of the given year to 31 stAshad of next year is taken for
analysis.
Table 2
Data analysis of Weighted Average Stock Price
Year NABIL GBIME CBBL BPCL NTC JBBL
2013/14 1,440.75 214.65 368.61 547.14 435.67 116.10
2014/15 1,133.37 178.90 294.02 482.56 449.40 93.61
2015/16 1,634.27 415.86 400.86 730.37 605.95 84.56
2016/17 2,118.52 565.23 909.94 942.86 634.71 140.28
2017/18 2,111.35 572.04 1,567.76 691.09 622.35 186.64
2018/19 2,225.35 492.34 1,957.57 604.02 671.91 191.87
2019/20 1,834.21 462.82 1,664.25 729.74 672.38 353.26
2020/21 1,182.42 333.11 1,240.31 602.20 801.50 171.85
2021/22 842.64 304.11 914.97 417.35 729.50 147.61
2022/23 779.89 289.19 1,026.80 360.71 656.63 179.33
Source: Nepal Stock Exchange
As depicted in Table 2 it is seen that the average stock price of the NABIL Bank in year
2013/14was 1440 and then raisedup to 2225.35 in Year 2015/16, after it was declined to
779.89 in 2022/23. Among all the company’s price of NABIL Bank seems to be highest
among GBIME, CBBL, BPCL, NTC and JBBL
2.2.2 EPS of Commercial Bank, Microfinance, Hydropower, Telecom And Development
Bank
Earnings per share (EPS)
It is calculated as a company's profit divided by the outstanding shares of its common stock.
The resulting number serves as an indicator of a company's profitability. EPS shows how
 14

much a company earns for each share, with a higher EPS indicating the stock has a higher
value when compared to others in its industry.
Earnings Per share (EPS) = Net Profit/ No. of shares outstanding
Table 3 Data analysis of EPS of NABIL, GBIME, CBBL, BPCL, NTC and JBBL
Year NABIL GBIME CBBL BPCL NTC JBBL

2013/14 70.67 14.06 58.74 32.40 80.8 9.33

2014/15 83.23 11.79 60.24 47.57 77.73 7.50

2015/16 91.05 16.15 49.28 32.40 75.33 9.47

2016/17 76.12 19.57 61.43 19.75 77.12 7.94

2017/18 57.24 15.58 101.46 28.68 97.04 12.16

2018/19 59.27 22.42 79.15 27.25 97.04 16.45

2019/20 59.86 25.51 69.04 31.15 90.36 10.73

2020/21 51.84 23.64 66.66 32.59 102.49 13.34

2021/22 50.57 26.46 79.38 31.25 116.56 17.14

2022/23 36.16 17.99 44.14 27.25 64.05 13.97

Source: Annual reports of NABIL, GBIME, CBBL, BPCL, NTC and JBBL
As depicted in Table 3 it is seen that the EPS of the NTC, NABIL and CBBL seems to be
highest in comparison to other companies. Similarly, EPS of GBIME, BPCL and JBBL is
low than other companies.
2.2.3 DPS of Commercial Bank, Microfinance, Hydropower, Telecom And Development
Bank
Dividend per Share (DPS)
Dividend per share (DPS) is the sum of declared dividends issued by a company for every
ordinary share outstanding. The figure is calculated by dividing the total dividends paid out
by a business, including interim dividends, over a period of time by the number of
outstanding ordinary shares issued. In the given table below, the dividend includes both
bonus and cash distributed to their shareholders in a given fiscal year.
Dividend per Share= Total Dividend amount/ No. of shares outstanding
 15

Table 4
Data analysis of DPS of NABIL, GBIME, CBBL, BPCL, NTC and JBBL
Year NABIL GBIME CBBL BPCL NTC JBBL

2013/14 30 12 25 25 45 0

2014/15 60 13 42.11 25 48 0

2015/16 65 15 48.23 18 46 12.6

2016/17 65 25 45 15 47 7

2017/18 36.84 23 52.7 20 50 9

2018/19 45 16 52.7 27 40 11.7

2019/20 48 20 45 20 41 10

2020/21 34 16 40 28 55 16.80

2021/22 34 25.50 44.34 28 55 12.75

2022/23 35.26 16 29 25 45 10
Source: Annual reports of NABIL, GBIME, CBBL, BPCL, NTC and JBBL
As depicted in Table 4 it is seen that the DPS of the NTC and CBBL is consistent throughout
10 years. Similarly, GBIME, BPCL and JBBL have low DPS compared to other selected
companies.
Further, DPS of NABIL Bank is very fluctuating with 65 % high and making low of 35%.
2.2.4 P/E Ratio of Commercial Bank, Microfinance, Hydropower, Telecom and
Development Bank
P/E Ratio
The price-earnings ratio (P/E ratio) relates a company's share price to its earnings per share.
A high P/E ratio could mean that a company's stock is over-valued, or else that investors are
expecting high growth rates in the future.
P/E Ratio= Price of stock/ EPS
 16

Table 5
Data analysis of P/E Ratio of NABIL, GBIME, CBBL, BPCL, NTC and JBBL
Year NABIL GBIME CBBL BPCL NTC JBBL

2013/14 17.71615 14.86 6.90 22.81 5.27 11.14

2014/15 16.28019 13.57 4.44 12.12 6.47 11.15

2015/16 19.9341 26.74 5.21 34.55 7.9 12.14

2016/17 33.30268 32.70 10.37 43.49 6.54 26.07

2017/18 33.36827 30.74 13.78 21.52 6.4 13.49

2018/19 39.54783 22.97 28.93 32.8 6.55 10.27

2019/20 25.4427 15.21 22.09 19.9 7.62 19.29

2020/21 17.7662 12.27 11.24 13.56 6.6 10.57

2021/22 15.81966 11.15 11.17 13.08 6.18 9.51

2022/23 21.15597 13.29 24.69 13.17 10.65 11.88

Source: Annual reports of NABIL, GBIME, CBBL, BPCL, NTC and JBBL
As depicted in Table 5 it is seen that the P/E ratio of the NTC very low which means that
market price of NTC is very under-valued. Similarly, GBIME, CBBL and JBBL have
consistent P/E ratio compared to other selected companies. Further, P/E Ratio of BPCL is
fluctuating with high of 32.8 and making low of 12.12.
2.2.5 Book Value of Commercial Bank, Microfinance, Hydropower, Telecom and
Development Bank
Book Value
The book value literally means the value of a business according to its books or accounts, as
reflected on its financial statements. Theoretically, it is what investors would get if they sold
all the company's assets and paid all its debts and obligations. Therefore, book value is
roughly equal to the amount stockholders would receive if they decided to liquidate the
company. Book Value per share=Net Book Value/ No. of share outstanding
 17

Table 6
Data analysis of Book Value of NABIL, GBIME, CBBL, BPCL, NTC, JBBL
Year NABIL GBIME CBBL BPCL NTC JBBL
2013/14 225 113.86 236.7 247 301.97 102.5
2014/15 269 112.73 164.63 266.94 330.19 103.2
2015/16 275 116.18 207.7 247.84 357.57 114.18
2016/17 251 123.09 219.8 195 498.78 115.61
2017/18 259 118.79 276.38 205 539.99 106.5
2018/19 244 145.11 203.5 238 539.99 124.66
2019/20 270 153.17 181.65 243 555.83 114.18
2020/21 256 152.77 271.84 293.9 608.86 121.48
2021/22 255.95 158.40 306.28 282.8 664.43 129.25
2022/23 257.31 151.95 212.97 261.90 612.74 128.86

Source: Annual Report of NABIL, GBIME, CBBL, BPCL, NTC and JBBL
As depicted in Table 6 it is seen that the Book Value of the NTC is very high which means
that theoretical value of NTC is very promising. Similarly, book value of GBIME, CBBL,
BPCL, NABIL and JBBL is consistent throughout last 10 years.
2.2 Data Analysis of Descriptive Statistics of Study Variables

Descriptive statistics are used to describe the basic features of the data in a study. They
provide simple summaries about the sample and the measures. Together with simple graphics
analysis, they form the basis of virtually every quantitative analysis of data.
This table shows the Descriptive Statistics of factors influencing stock price.
Table 7
Descriptive Statistics

Variables N Mean Standard Deviation Range

Stock Price 60 725.49 550 2140.79

Earnings Per Share 60 46.76 30.24 109.06

Dividend Per Share 60 30.86 16.67 65

P/E Ratio 60 16.75 9.48 39.05

Book Value 60 247.37 138.17 561.93

 18

Table 7 shows the descriptive statistics of 6 companies listed on NEPSE from 2013/14to
2022/23. Descriptive statistics shows that, the mean of the Stock Price is highest among all
variables i.e. 725.49 with standard deviation of 550 and range of 2140.79. Mean of EPS is
46.76 with standard deviation of 30.24 and range of 109.06. Mean of DPS is 30.86 with
standard deviation of 16.64 and range of 65. Mean of P/E Ratio is 16.75 with standard
deviation of 9.48 and range of 39.05. Book Value is with standard deviation of and range of
39.05. Mean of Book Value is 247.37 with standard deviation of 138.17 and range of 561.93.
2.3 Descriptive Analysis

Correlation Analysis
Correlation analysis is a statistical method used to evaluate the strength of relationship
between two quantitative variables. A high correlation means that two or more variables have
a strong relationship with each other, while a weak correlation means that the variables are
hardly related.
2.3.1 Pearson Correlation between variables
High degree: If the coefficient value lies between ± 0.50 and ± 1, then it is said to be a strong
correlation.
Moderate degree: If the value lies between ± 0.30 and ± 0.49, then it is said to be a medium
correlation.
Low degree: When the value lies below + .29, then it is said to be a small correlation.
Table 8 Pearson Correlation analysis between variables
Stock Earning Dividend Per P/E Book
Price Per Share Share Ratio Value
Stock Price 1
Earnings Per Share .557** 1
Dividend Per Share .659** .906** 1
P/E Ratio .504** -.262* -.095 1
Book Value .218 .786** .647** -.328* 1

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

Correlation is significant at the 0.05 level (2-tailed).
Pearson’s correlation was used to determine the correlation among variables. Correlation
coefficients vary between -1 and 1. Negative values indicate negative correlation, and
positive values indicate positive correlations. Values close to zero reflect the absence of
correlation.
 19

The Table 8 shows the correlation between Stock Price, EPS, DPS, P/E Ratio and Book
Value. The table depicts that there is a positive relation between EPS and Stock Price. Here,
the correlation between EPS & Stock Price is .557**. A higher EPS indicates an inclining
stock price, a decreased EPS also have the same consequences in the form of declining stock
price.
Other variables DPS and P/E Ratio is positively correlated with Stock price i.e. .659 **
and .504** respectively so therefore the increase in DPS and P/E Ratio results into the
increment of stock price and vice-versa.
However, Book Value of a company doesn’t seem to have much impact on stock price of the
company. It has correlation of 0.218, which implies there is moderate correlation between
stock price and Book Value.
2.3.2 ANOVA analysis
Table 9 ANOVA
Model Sum of Squares df Mean Square F Sig.
Regression 14920336.192 4 3730084.048 63.406 .000b
Residual 3235580.742 55 58828.741
Total 18155916.933 59
Findings from the Fishers ratio (i.e., the F-Statistics) which is a proof of the validity of the
estimated model as reflected in Table 2.8 indicates that, the F is about 63.406 and a p-value
or F(sig) that is equal to 0.000, this invariably suggests clearly that simultaneously the
explanatory variables are significantly associated with the dependent variable. That is, they
strongly determine the behavior of the market values of share prices.
Regression Analysis
Table 10 Regression Analysis
Coefficient
Model Unstandardized Standardized t Sig.
Coefficients Coefficients

B Std. Error Beta

(Constant) -449.489 103.738 -4.333 .000

Earnings Per Share 13.731 3.255 .749 4.218 .000
Dividend Per Share 8.524 4.850 .256 1.758 .084
P/E Ratio 35.940 3.709 .614 9.689 .000
 20

Book Value -1.344 .385 -.335 -3.490 .001

The Table 10 shows additional information on regression analysis. The first column shows
variables. The second column (B) is the constant value of dependent variables (Stock Price)
when the independent variables are zero in value. For example, if the value of earning per
share is 0, the value of Share price is 13.731. The third column is the standard error. The third
column is the standard error. When B is divided by standard error, it gives t value which is in
column 5th. The fourth column consists of beta value which studies the multiple correlations.
However, this research has does not need multiple correlation.
The 6th column shows the significance level which can be used in hypothesis testing. At p
value less than 0.05, the regression is significant and the alternate hypotheses formed before
is accepted. Here, the significance value of EPS, P/E Ratio and Book Value is less than 0.05
which means there is significant effect of them upon Stock Price.
The simplest form of regression equation with one dependent and one independent variable is
given by:
Y= a + bx ……………. (i)
Where, y= estimated value of dependent variable, a= constant value of dependent variable (y)
when the value of independent variable (x) is zero, b= regression coefficient, and x= value of
independent variable
Similarly, here the dependent variable “stock price” is a function of other independent
variables. The regression model for this study is shown below:
SP= a + β1EPS + β2DPS + β3PR + β4BV + e
Where, SP= Stock Price,
a =constant value of SP,
β = regression coefficient,
EPS = Earnings Per Share,
DPS = Dividend Per Share,
PR = P/E Ratio,
BV = Book Value and e = Standard error.
Model Summary
Table 2.10 Model Summary
R Square .822
Adjusted R Square .809
 21

Std. Error of the Estimate 242.54637

R^2 is the coefficient of determination. It tells us how many points fall on the regression line.
The R^2 in the figure is 0.822 which means that 82 percent of the variation of dependent
variable is created by the four-independent variable (EPS/DPS/P/E Ratio, Book Value). The
adjusted Squared compares the descriptive power of regression models that include diverse
numbers of predictors. The adjusted R^2 in the table is 80.9%.
The standard error of the regression is 242.54637. It is an estimate of the standard deviation
of the error μ.
2.4 Major Findings

Earnings Per Share (EPS), Dividend Per Share (DPS), P/E Ratio and Book Value are some of
the factors that influence the Stock price of listed companies in Nepal. The objective of the
study was to assess the impact of these factors on stock price of listed Nepalese companies.
The major findings of the research from the above presentation and analysis have been
highlighted below-
 No significant relationship between Dividend per share and stock price.
 Companies in Nepal prefer bonus shares over cash dividends, leading to lower market
prices.
 Bhattarai and Mishra (2014) found dividends have inverse impact on share price of
commercial banks.
 Positive relationship between EPS and stock price.
 Thapa (2019) found a positive relationship between MPS and EPS.
 Positive relationship between P/E Ratio and stock price.
 Earning per share and price-earnings ratio have significant positive association with
share price.
 Positive relationship between Book Value and stock price.
 Challa and Chalam (2015) found book value and return on net worth have significant
positive relationship with market share price.
22
 23

CHAPTER III
SUMMARY AND CONCLUSION
3.1 Summary

This paper examines the determinants of stock market performance in Nepal, which has been
passing through up and down in recent years. Since stock market tends to be highly sensitive
and volatile, we examine the determinants of stock market index on yearly data. Stock market
in recent years has become an integral part of economic development. It can play a vital role
in encouraging and channeling the saving to provide the entrepreneurs for investment in
profitable projects in the economy. Examples from the developed countries have proved that
the stock market is the cause and economic development is the effect. Stock market serves as
a direct link between the suppliers and the users of capital fund. Thus, stock market has both
theoretical and practical perspectives.
The data of past 10 years were taken for analysis and all data were analyzed through MS
Excel and SPSS.
3.2 Conclusion

This study is focused on the influence of some of the factors (EPS, DPS, P/E Ratio and Book
Value) on Stock price of companies of Nepal. From the above data analysis, it is concluded
that the above-mentioned factors influence the Stock Price to some extent. However, the
abovementioned factors are not the sole determinants of Stock Price. This study has taken
only four of the possible factors which were believed to have some influence on the Stock
price. There are many other factors which are believed to have the same or greater influence
on Stock price.
The results and the analysis have revealed some additional questions which need to be
answered in future studies. More factors than the ones included in the research should have
an impact on the Stock price. It would, therefore, be interesting to conduct a similar study
with different factors that may provide an impact on Stock price.
A time period of ten years has been used in this study and for future research we recommend
to use a longer time period. It would be interesting to see whether the results from this study
are applicable if a study is conducted over a longer period of time or during another time
period.
 24

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