Factors Affecting Stock Price Volatility of Commercial Banks in Nepal

Abstract

This study explores the factors affecting the market price of Nepalese commercial banks over the period from 2017/18 to 2021/22 AD. Utilizing bivariate correlation and regression models, data sourced from the annual reports and official publications of eight NEPSE-listed banks underwent comprehensive analysis facilitated by MS- Excel and SPSS. The results unveil a significant positive correlation between earnings per share (EPS) and price-earnings ratio (P/E ratio), indicating that as EPS increases, so does the P/E ratio, and consequently, the market price. However, the impact of book value and dividend per share on market prices was found to be negligible, suggesting that these factors exert minimal influence on market valuations. The primary inference drawn from the findings underscores the dominance of price- earnings ratio and earnings per share as pivotal determinants of share prices within Nepalese commercial banks. This indicates that investors place substantial emphasis on these metrics when evaluating the investment potential of Nepalese commercial banks. These findings provide valuable insights for investors, financial analysts, and policymakers, offering a clearer understanding of the market dynamics and the key drivers of share prices within the Nepalese banking sector. Moreover, they underscore the importance of considering EPS and P/E ratio when making investment decisions in Nepalese commercial banks.