Factors Affecting the Share Price: Evidence from Nepalese Commercial Banks

Abstract

This study examines the factors affecting the share price of Nepalese commercial banks. Market price per share is selected as dependent variable while earning per share, divided per share, price earnings ratio, book value per share, return on assets and size were chosen as firm specific independent variables. Likewise, gross domestic product, inflation and money supply were chosen as macroeconomic independent variables. The data were collected from the banking and financial statistics and supervision report published by Nepal Rastra Bank and annual report of selected banks. The multiple regression models were estimated to test impact of firm specific and macroeconomic factors on share price of Nepalese commercial banks.Using data of 14 banks listed in NEPSE for the period 2002/03-2013/14, the result shows that firm specific variables like earnings per share, divided per share, price earnings ratio, book value per share, return on assets and size are the major determining stock price in context of commercial banks in Nepal. Among the variables, size is found to be the most important determining variable that affects the share price. It means, larger the firm size, higher would be the stock price. Among the macro economic variables such as gross domestic product, inflation and money supply, gross domestic product is a major variable that affect the share price.