Determinant of Stock Market Prices in Nepal: A Case of Commercial Banks


  • Tribhuvan University, Nepal


Equity share investment is one of the key investment paths that provide significant returns for investors but, unusual stock price instability makes confusion for them, as well as troubles for policymakers and the government authorities. This study aims to identify the empirical variables that influence the stock market price in commercial banks for 2015/16 to 2019/20 using a set of dependent and independent variables. The study is based on 130 observations from 26 commercial banks (out of 27) in Nepal using a secondary source and the information obtained from annual reports. The descriptive and causal-comparative research design was employed. For that, mean, standard deviation, correlation and regression analysis techniques have been used. The results revealed that Market to Book proportion (M/B), Price-earnings proportion (P/E) and Earning Yield proportion (E/Y) have a significant positive association with the stock market price. In contrast, the Dividend Yield proportion (D/Y) has a positive but insignificant impact on the stock market price. The finding of this study is valuable to the curious investors, concerned bankers, academicians and government authorities, which help them to more about the stock market’s returns and likelihood in the country.


Dividend Yield Proportion, Earnings Yield Proportion, Market to Book Value Proportion, Price-earnings Proportion, Stock Market Price

JEL code classification: M 41, C 32

Full Text:


Almumani, M. A. (2014). Determinants of equity share prices of the listed banks in Amman stock exchange: Quantitative approach. International Journal of Business and Social Science. 5(1):91–104.

Arkan, T. (2016). The importance of financial ratios in predicting stock price trends: A case study in emerging markets. Finanse Rynki Finansowe Ubezpieczenia. 79:13–26.

Balakrishnan, K. P. (1984). Determinants of equity prices in India. Management accountant, 19(12), 728-730.

Ball, R., and Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research. 159–78.

Baskin, J. (1989). Dividend policy and the volatility of common stocks. Journal of Portfolio Management. 15(3):19–25.

Bhattarai, B. P. (2018). The firm-specific and macroeconomic variables effects on share prices of Nepalese commercial banks and insurance companies. Review of Integrative Business and Economics Research. 7(3):1– 11.

Collins, J. (1957). How to study the behavior of bank stocks. The Analysts Journal. 13(2):109–13.

Constand, R. L., Freitas, L. P., and Sullivan, M. J. (1991). Factors affecting price-earnings ratios and market values of Japanese firms. Financial Management. 68–79.

Desai, M. (1965). Stock prices, earnings and dividends in India - A quantitative analysis. Indian Economic Journal. 12(4):432–6.

Dhanani, A. (2005). Corporate dividend policy: The views of British financial managers. Journal of Business Finance and Accounting. 32(7â€8):1625–72.

Fama, E. F. (1981). Stock returns, real activity, inflation and money. American Economic Review. 71(4):545–65.

Fama, E. F., and French, K. R. (2007). The anatomy of value and growth stock returns. Financial Analysts Journal. 63(6):44–54.

Ghimire, R. R., and Mishra, D. (2018). Determinants of stock price in Nepalese market. International Research Journal of Management Science. 3(1):123–35.

Gill, A., Biger, N., and Mathur, N. (2012). Determinants of equity share prices: Evidence from American firms. International Research Journal of Finance and Economics. 90(90):176-–92.

Irfan, C. M., Nishat, M., and Sharif, H. (2002). Key fundamental factors and long-run price changes in an emerging market - A case study of Karachi stock exchange (KSE). The Pakistan Development Review. 517–33.

John, K., and Williams, J. (1985). Dividends, dilution and taxes: A signaling equilibrium. The Journal of Finance. 40(4):1053–70.

Kurihara, Y. (2006). The relationship between exchange rate and stock prices during the quantitative easing policy in Japan. International Journal of Business, 11(4), 375–86.

Modigliani, F.F., and Miller, M. (1958). The cost of capital corporation finance and the theory of investment. The American Economic Review. 48(3):261–97.

Molodovsky, N. (1995). A theory of price-earnings ratios. Financial Analysts Journal. 51(1):29–43.

Nel, I., and Kruger, W. D. K. (2001). Equity index futures contracts and share price volatility: A South African

perspective. Meditari: Research Journal of the School of Accounting Sciences. 9(1):217–29.

Nepal, N. (2018). Effect of firm-specific and macroeconomic variables on share price determination of commercial banks in Nepal. Available at SSRN 3133992.

Nepal R. B. (2020). List of bank and financial institutions.

Nirmala, P. S., Sanju, P. S., and Ramachandran, M. (2011). Determinants of share prices in India. Journal of

Emerging Trends in Economics and Management Sciences. 2(2):124–30.

Pradhan, R. S., and Dahal, S. (2016). Factors affecting the share price: Evidence from Nepalese commercial banks. Available at SSRN 2793469.


  • There are currently no refbacks.