thesis on dividend policy of commercial banks in nepal

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Corporate Dividend Policy: A Study of Commercial Banks of Nepal

Dividend policy is the policy used by a company to decide how much it will pay out to shareholders in dividends. Taking financial indicators of 8 commercial banks for the period of 1996/97 to 2006/07, this study attempts to elucidate the dividend practices of commercial banks of Nepal. Abound by controversies and unpredictability, this study concludes that commercial banks of Nepal do not show uniform trend of dividend policy. Dividend policy practiced by commercial banks of Nepal is neither fully explained by residual theory nor stable theory. With the development of financial institutions in Nepal, they need to follow a robust method of dividend policy so that investors can predict stock market and make a rationale investment decision.

Journal of Global Economics, Management and Business Research

Published: 2020-12-19

Page: 12-20

Issue: 2020 - Volume 12 [Issue 4]

Original Research Article

DETERMINANTS OF DIVIDEND PAYOUT DECISIONS OF COMMERCIAL BANKS IN NEPAL

BISHNU PRASAD BHATTARAI *

Excel Business College, Pokhara University Affiliated, New Baneshwor, Kathmandu & Faculty Member, Patan Multiple Campus, Tribhuvan University, Patan Dhoka, Lalitpur, Nepal.

*Author to whom correspondence should be addressed.

This study attempts to determine the factors affecting the dividend payout decision of commercial banks in Nepal. The study is based on the secondary balance panel data of 12 commercial banks with 60 observations' for the period of 2013/14 to 2017/18. The dividend payout ratio has taken as dependent variables whereas return on assets, size of bank, market value per share, and inflation rate has been taken independent variables. The results of Pooled OLS model and Random Effects model for panel data analysis has been estimated in this study. The regression result of these models reveals that profitability, size of banks and Inflation rate are negatively related to dividend payout decision of Nepalese commercial banks evidences. It shown that higher the profitability, size of banks and Inflation rate lower would be the dividend payout decisions. However the results show that market value per share has positive relationship with dividend payout decision. This indicates that increase in the level of market value per share leads to increase in the dividend payout decision. The study has concluded that the market value per share is the major determinant of dividend payout decision.

Keywords: Dividend payout ratio, return on assets, size of bank, market value per share, and inflation rate, random effects, fixed effects.

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Working Capital Management of Commercial Banks in Nepal

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