Impact of Fundamental Factors on Stock Price: A Case of Nepalese Commercial Banks

Abstract

This study examines the impact of fundamental factors on stock price of Nepalese commercial banks. Return on assets, return on equity, net profit margin, earning per share and dividend per share are the independent variables. And market price per share and change in market price per share are the dependent variables. Data are collected from the Banking and Financial Statistics and Bank Supervision Report published by Nepal Rastra Bank and annual reports of the selected commercial banks. The study is based on 13 commercial banks of Nepal from 2007 to 2014, leading to a total of 104 observations. The regression models are estimated to test the significance and impact of fundamental factors in stock price of Nepalese commercial banks. The result shows that dividend per share (DPS), return on assets (ROA) and earning per share (EPS) are positively related to the stock price (market price per share and change in market price per share). This indicates that higher the DPS, ROA and EPS, higher would be the stock price. However, net profit margin is negatively related to stock price. The regression result shows that the beta coefficients for DPS and EPS are positively significant with market price per share at 5 percent level of significance.