The customary strong dividends effect and a very weak retained earning effect

The customary strong dividends effect and a very weak

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The customary strong dividends effect and a very weak retained earning effect indicating the attractiveness of dividends among Nepalese investors. The findings of the study suggest that Nepalese stock market has not started recognizing the impact of retained earnings (Pradhan, 2003). There are differences in financial position of high dividend paying and low dividend paying companies. The study revealed that there is a positive relationship between dividends and stock prices. Further, the coefficient of dividends is higher as compared to the coefficient of retained earnings (Chhetri, 2008). The purpose of this study is to analyze the relationship between dividend policy and its impact on price of the shares listed in the Nepal stock exchange. Specifically, it examines the impact of earnings per share, retained ratio, return on equity, profit after tax, liquidity, dividend payout ratio, dividend yield ratio, growth of total assets, size of total assets and leverage on market price per share and volatility of share price. The remainder of this paper is organized as follows. Section two describes the sample, data and methodology. Section three presents the empirical results and the final section draws conclusions and discusses the implications of the study findings. 2. Methodological aspects This study is based on secondary data which were gathered for 17 banks in Nepal. The main source of data are supervision report of Nepal Rastra Bank, annual reports of commercial banks and so on. The data were collected on market price per share, earnings per share, retained ratio, return on equity, profit after tax, liquidity, share price volatility, dividend payout ratio, dividend yield ratio, growth of total assets, size of total assets and leverage i.e. total debt to equity ratio. The pooled cross-sectional data analysis has been undertaken in the study. The research design adopted in this study is casual comparative type as it deals with relationship of dividend policy and control variables with bank performance. More specifically, the study examines earnings per share, retained ratio, dividend payout ratio and dividend yield ratio. These data were collected for the period 2008-2013. Table 1 shows the number of commercial banks selected for the study period and number of observations. Table 1: Number of commercial banks selected for the study S.No. Name of commercial banks Study period Observations 1 Agriculture Development Bank Limited (ADBL) 2008-2013 6
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4 2 Nabil Bank Limited (NABIL) 2008-2013 6 3 Nepal Investment Bank Limited (NIBL) 2008-2013 6 4 Standard Chartered Bank Nepal Limited (SCBL) 2008-2013 6 5 Himalayan Bank Limited (HBL) 2008-2013 6 6 Nepal Bangladesh Bank Limited (NBBL) 2008-2013 6 7 Nepal SBI Bank Limited (SBI) 2008-2013 6 8 Everest Bank Limited (EBL) 2008-2013 6 9 Bank of Kathmandu Limited (BOK) 2008-2013 6 10 Lumbini Bank Limited (LBL) 2008-2013 6 11 Machhapuchchhre Bank Limited (MBL) 2008-2013 6 12 Kumari Bank Limited (KBL) 2008-2013 6 13 Laxmi Bank Limited (LXBL) 2008-2013 6 14 Siddhartha Bank Limited (SBL) 2008-2013 6 15 Citizens Bank International Limited (CBIL) 2008-2013 6 16 NMB Bank Limited (NMB) 2008-2013 6 17
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