Kathmandu University School of Management

Gwarko, Lalitpur

Research Proposal- Draft

Impact of Dividend Policy on Stock Prices

Submitted by:

Akriti Dahal-177019

Namita Lamichhane-177054

Submitted to:

Mrs. Roshee Lamichhane

Facilitator of Introduction to Research Method

BBA Year III, Semester II

Date: July 8, 2020

Table of Contents
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Introduction 3
Problem Statement 5
Research Question 6
Research Objective 6
Literature Review 6
Methodology 14
Research Procedure 16
Administration of the Questionnaire 16
Data Analysis 17
Limitations 17
References 17
Appendix 19
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Introduction

The general development of a nation to a great extent relies on economic

development. To improve the economy, development of the capital market and money market

is very crucial. Financial institutions like banks and finance companies contribute in

developing the money market as well as the capital market by mobilizing the deposit

amounts.

Shareholders get dividends out of the profit. Instead of paying dividends a firm can

also retain the fund to exploit other growth opportunities. In this way, shareholders can

expect benefit indirectly through future increase in price of stock. Their wealth can be

increased through either dividend or capital gain. And dividend policy contains the decision

to pay out earnings versus retaining them for reinvestment in the firm. Thus dividend policy

is an integral part of financial decisions.(Silver, 2020)

Dividend is a portion of income directly returned to shareholders which is announced

by management of the corporate firm only if profits are made after successful business

operation. Dividend implies the portion of retained earnings which is paid to the stockholders

while dividend policy refers to the guidelines that corporate management uses in establishing

the portion of retained earnings that is paid to the stockholders in dividends which should be

able to provoke that dividend meet the average shareholders expectation. (Chen, 2020)

According to Friend and Puckett (1964), Dividend policy involves the decision to pay

out earnings versus retaining them for reinvestment in the firm. In this sense, dividend policy

is concerned with balancing the current income to the shareholders and future growth of the

firm through the reinvestment of retained earnings that maximize the prices of the stock.
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Therefore, dividend is both a problem and opportunity, which can affect the internal and

external financing in the firm which makes it a complex decision.

Dividend policy is equally important for managers and investors, as investors have to

plan a return on their investment portfolio. Dividends are not only a source of income for

investors but also a signal of company performance. So selecting a suitable dividend policy

for a company is one of the most important decisions for the management and investors.

(Joshi, 2012). Higher dividends increase the value of the shares and low dividends reduce the

price of share. In order to maximize wealth under uncertainty, the firm must pay enough

dividends to satisfy investors (Irwind, 1964).

However, there are two different views regarding dividend policy and stock price.

Those who think dividends have more impact in determining share price, argue that

shareholders prefer current return rather than future return and dividend distribution is an

indicator of earning capacity in future. The other views are based on the importance of

retained earnings. They argue that retained earnings are an indicator of future investment

opportunities. ( Joshi, 2012).

A number of studies on impact of dividends on stock price have been carried out in

different parts of the world particularly in developed countries. Most of the earlier studies

show the significant role of dividend policy on stock price. The corporate firms should follow

the appropriate dividend policy to maximize the shareholders' value (Joshi, 2012). The

overall objective of this paper is to observe the impact of dividends on stock price in Nepal.

On top of that this paper will also determine the relationships of market price per share with

related financial indicators such as earnings per share and retained earnings.
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Problem Statement

Dividend policy remains a controversial issue in the field of finance, the question

whether dividend policy affects the stock prices or not is still not resolved very clearly.

Black and Scholes (1973) concluded that there is no relation between stock price and

dividend whereas Ahmed (2011) concluded that retained earnings were the main factor that

impacted volatility of share price in the market. Malaysian researchers showed positive

relations while one of the Nepali journals written by Amar Dhungel claimed that profitability

was the factor to influence share price. Black (1976) concluded that dividend yield is not

affected by financial performance, investigations should be made to ascertain other factors

that affect dividend yield.

In the context of Nepal, the empirical findings of dividend research have produced

mixed results. Chhetri (2008) found a positive relationship between the dividend theories and

the corporate dividend policy, while others did not. Manandhar (1998) found that dividend

per share and return on equity have positive impacts on market capitalization while earnings

per share, price-earnings ratio, and dividend yield have negative impacts.

Pradhan (2003) found that dividend payment is more important as opposed to retained

earnings in Nepal. The results revealed the customary strong dividends effect and a very

weak retained earning effect indicating the attractiveness of dividends among Nepalese

investors. The findings suggest that Nepalese stock market has not started recognizing the

impact of retained earnings. Joshi (2012) has revealed that there is a positive relationship

between dividends and stock prices. He suggests that higher dividends raise stock prices,

while dividend cuts hurt prices. However, other studies done by Baskin (1989) and Black

(1973) show that there is negative and no effect between dividend and stock prices. Hence

they all show mixed results.

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A majority of earlier studies like mentioned above have shown contradictory findings.

Due to the inconsistency in the studies on dividend policy, it is therefore open for further

debate and conversation until a single point of agreement is reached. This paper attempts to

explain the effect of dividend payment on market price of share. This paper will investigate

these implications and attempt to ascertain the effect, status of dividend payment on market

price of share.

Research Question

● Does dividend policy have any effect on stock prices?

Research Objective

The main objective of this research proposal is to know if there is any relation between

market price of stock and dividend and to know if distribution of dividend by public

companies will have an impact on stock price or not.

Literature Review

Dividend Policy is a firm’s guiding principle and company’s option either to pay

dividends to its shareholders or to retain the profits and invest it back in the firm. Numerous

studies have already been carried out to know the impact of dividend policy on stock prices.

Dividend policy is an extensively researched topic in the area of finance, but at the same time

it is arguable and the center of attention of researchers to discover its new scope.

Sharif et al, (2015) studied 45 non-financial companies listed on the KSE-100 index that

have earned profits and paid dividends for a period of 2001 till 2012. This journal implies

that there is a negative significant relation between Return on Equity and Share Prices. It is
 7

recommended that firms in the sample should regularly pay dividends as it will cause an

upward movement in the stock market prices, whereas profit retention by firms will result in a

decrease in the value of the stock market prices.

Modigliani and Miller (1961) proposed the “Dividend Irrelevance Theory which

suggested that in a perfect world with no taxes or bankruptcy cost, the dividend policy is

irrelevant. They proposed that the dividend policy of a company has no effect on the stock

price of a company. Similarly, Black and Scholes (1973) also argue on the irrelevance of

dividend policy. Jakata and Nyamugure (2014) and Abrar-ul-haq, Akram, and Ullah (2015)

argued that dividend policy had no impact on stock price. Similarly, studies by Walter

(1956); Gordon (1959); Pani (2008); Akbar and Baig (2010); Masum (2014) and Jatmiko

(2016) have proved the relevance of dividend policy on firm value.

Dhungel (2013) did a research about the impact dividend had on the share price and

found contradictory findings. He found that the majority of the share investors care for the

dividend per share of the company before purchasing shares from the secondary market

whereas all the investors cared for profitability of the institution. He concluded by saying

profitability plays a greater role in stock price rather than dividend per share.

Anjorin (2015) investigated the impact of dividend policy on the share price of 10

selected quoted firms in Nigeria stock exchange from 1997 to 2012. The data were analyzed

using the least square method. The results of their study shows that the payout ratio of the

companies under the study have a greater impact than their dividend payouts in influencing

the price of their shares in the market. Likewise, Bamidele et. al, (2018) studied the issue on

dividend policy on stock price of Nigeria Stock Exchange. Panel data set over the period of

2010-2014 was obtained from the audited annual reports and daily stock price of the selected

firms which were analyzed using pooled regression, random regression model, and fixed
 8

regression model. The results of the study revealed that payout ratio has positive effect on

stock price, though not significant while earnings per share and size has a significant positive

relationship with stock price whereas leverage and market to book value has negative

relationship to stock price.

Sharma (2011) also studied the determinants affecting the stock price and the results

revealed that earning per share, dividend per share, and book value per share has a significant

impact on the market price of share. Furthermore, results of the paper indicated that dividend

per share and earnings per share being the strongest determinants of market price .Thapa

(2019) explored the influencing factors of stock price in Nepal with reference to Nepalese

commercial banks listed on the Nepal Stock Exchange Ltd. over the period of 2008 to 2018

AD. The results revealed that earning per share (EPS), dividend per share (DPS), market

whims and rumors and company profiles have the significant positive association with share

price while interest rate (IR) and price to earnings ratio (PER) showed the significant inverse

association with share price. It means the stock market of Nepal is sensitive to the country's

financial system, dividend and short term interest rate has been one of the major determinants

of the stock market. So, it stated that dividend and short term interest rate could be the most

important predictors of the stock prices in the secondary market of Nepal.

Black et al., (1974) argued that the best method for testing the effects of dividend policy

on stock prices is to test the effects of dividend yield on stock returns. After using the best

available methods like the capital asset pricing model (CAPM), they contend that there were

no effects dividend yield had on stock returns and change in dividend policy will have no

effect on the corporation's stock price. Puket et al., (1964) studied the relationship between

distribution of profits and stock price. By conducting their research, in addition to comparing

the effects of dividend and retained earnings, they reached the conclusion that dividend
 9

payment does not cause an increase in the stock value of firms without growth and it causes a

decrease in stock value in firms which have profitable investment opportunities.

Shoorvarzi and Nekoomaram (2010) studied the effect of dividend percent volatility of

the stock return of firms. The financial results of the research indicate that there is a

significant relationship between dividend percent volatility and the stock return of firms.

Gordon (1963) argues that paying more dividend could reduce risk, affect capital costs, and

reduce stock price. Some empirical evidence has demonstrated a negative relation between

dividend yield and/or dividend payout and share price volatility in advanced markets. Baskin

(1989) demonstrates that the return on each share has an inverse relation with the price

fluctuation.

Irandoost et al., (2013) analyzed 65 firms listed on Tehran Stock Exchange from 2007

to 2012. They used correlation analysis methods and multiple regressions in order to analyze

the data and test the hypotheses.The research results indicated that the dividend policy has a

significant effect on stock price volatility in a short time. However, the dividend policy does

not have a significant effect on stock price volatility in a long time. They state that the

dividend policy does not have a significant effect on investment decisions.

Theoretical Framework

Theoretical framework consists review of different theories related with impact of

dividend on share price from textbook, reference books and practice in dividend policy and

its impact on market prices of stock. A brief description of different theories on dividend

policy is given below:

Irrelevance Theory
 10

Modigliani and miller (1961) have argued that firms dividend policy has no effect on its

value of assets i.e. if the rate of dividend declared by a company is less its retained earnings

will increase and so also the net worth and vice versa. This theory is based on a number of

assumptions the following are the most important.

a. There are no personal or corporate income taxes.

b. There are no stock floatation or transaction costs.

c. Dividend policy has no effect on the firm’s cost of equity.

d. The firm’s capital invest policy is independent of its dividend policy.

e. Investors and managers have the same set of information regarding future opportunities.

Agency Cost Theory of Free Cash Flow

Jensen and Meckling (1976) explains that the interests of managers and the interests

of shareholders are often contradictory, so it can cause a conflict between them. The situation

happens because managers try to put his personal interests that are not in accordance with the

investor interests as priority where the manager’s interests can augment the company’s

expenses that can reduce the company’s profit. In theory of free cash flow, it explains that the

distribution of dividend to investors becomes a means to reduce agency costs in free cash

flow. With the distribution of dividend to shareholders, it caused unavailability of free cash

flow for the company, so management is forced to seek external funding such as issuing new

shares to finance its investment. Indirectly, dividend distribution can oversee the company’s

investment activities, so it can minimize conflict between manager and shareholder.

Walter's Model of Dividend Relevance

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Walter (1963) explains the relevance of dividend for valuation of shares or

maximization of shareholders wealth. According to Walter, investment policy of a company

cannot be alienated from its dividend policy and both are interlinked. An appropriate

dividend policy favorably affects the company's value. The key argument in support of the

relevance proposition of Walter's model is the relationship between return on firm's

investment or its internal risk of return (r) and its cost of capital or required rate (k). The firm

would have an optimum dividend policy, which will be determined by the relationship of r

and k.

The Theory of Dividend Policy effect on the company Investors

This theory implies that some investors prefer a higher rate of dividends while others

prefer to retain the earnings and reinvest them in the company. Elton and Gruber (1970) show

that the investors' preferences towards the dividends are varied, also the dividend policy does

not only affect the share price in the stock market but also it includes the company investors.

Pecking Order Theory of Dividends

The Pecking Order Theory of Dividends describes a level in corporate fundraising

which indicates that companies prefer to use internal equity in financing investments and

implement them as growth opportunities. This theory states that companies prefer internal

funding rather than external funding, secure debt rather than risky debt, and ordinary shares.

In this theory, companies that are experiencing high growth will make fewer dividend

payments compared to the company who has lower growth rate. (Myers & Majluf, 1984).

The Bird in the Hand Theory

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Gordon (1963) postulates that there is a relationship and an influence of the dividend

on the potential capital gains for the investors. It assumes that there is a stability in the ratio

of income on the investment, the required rate of return, the growth rate of the company,

ratios of dividends for the shareholders and relying on the owners' equity by the company

administration to finance its investments. In other words, this theory indicates that if the

company wants to maximize their share price, then they should adopt a high dividend ratio.

The Theory of the Effect of the Asymmetric Information of the Dividend on Investors

Miller and Modigliani (1961) indicates that investors consider any change in the

dividend policy as a sign for potential gains for the company; the higher dividend refers to a

positive expectation for the company to achieve future earnings and vice versa. This theory

maintains that changes in the dividend is taken as a signal for the future earnings and offers

information about the company earnings in the future that might affect negatively or

positively the share prices.

Residual Theory of Dividends

The Residual Theory of Dividends states that the dividend will be paid if the company

has residual net income after meeting the funding needed for a profitable investment for the

company (Gitman & Zutter, 2014). Based on this theory, the company’s policy to pay

dividends is the last priority if the company has residual funds. If the company revenue in

that year is not sufficient for the company’s funding, then the dividends will not be paid by

the company. In other words, this theory assumes that the company’s main funding comes

from its retained earnings.

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Based on the literature review,research questions, and objective of the study,the

following conceptual framework of relationship between independent and dependent

variables is proposed. In this study Stock price is taken as a dependent variable whereas

dividend is taken as independent variable.

Dividend Stock Price

Independent Dependent variable
variable

Fig. 1: Theoretical Framework

Hypothesis

Based on the literature review,research questions, and objective of the study following

hypothesis is proposed for the study.

Null hypothesis (H0): There is no significant relationship between dividend and stock price.

Alternative hypothesis (H1): There is a significant relationship between dividend and stock

price.

Methodology

Methodology is the systematic, theoretical analysis of the methods applied to a field

of study. It comprises the theoretical analysis of the body of methods and principles
 14

associated with a branch of knowledge. Typically, it encompasses concepts such as

theoretical models, phases and quantitative or qualitative techniques. (Irny & Rose,2005).

This chapter gives a description of the research methodology used in achieving the objectives

of this study. The chapter presents the expected results, application and uses, unit of analysis,

validity and reliability, population & sample, sampling design, measures, administration of

questionnaire, data collection procedures and data analysis.

Research Design

The research design of this study has been more descriptive as well as analytical using

dividend as an influencing factor of market price of stock. For this purpose secondary data

and information are obtained from different websites and primary data are obtained through

questionnaire surveys asked to shareholders. This study is carried out by using quantitative

analysis methods. Mainly secondary data has been used for analysis, so the research design of

this study is based on descriptive analysis.

Expected results, application and uses

Shareholders expect dividends as it is a source of return for the investment done by

them. Shareholders invest in shares for the purpose of getting a high return and maximizing

their wealth . In Nepal many investors lack enough knowledge about the share market and

people are investing haphazardly in the shares. There is no solid finding if the dividend

influences the stock price. This research will help to overcome this gap to some extent. This

research will help the investors and firms to understand the extent of impact that dividend

will have on stock price. It is aimed at providing important information to the investors and

respective firms that are taken as samples.

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The findings of this research proposal are beneficial for bankers and academic researchers.

Results are also beneficial for internal and external investors while taking decisions of

investment in respective capital markets. The research might be helpful for the managers of

commercial banks in order to concentrate on the factors which actually determine the

financing policy of banks rather than just focusing on dividend policy. This study will also

help management and policy makers in making a suitable dividend policy which can benefit

the company to greater extent.

Unit of Analysis

This study focuses on fluctuation of stock prices of the companies listed on Nepal

Stock Exchange as in Nepal there exists only one stock exchange namely Nepal Stock

Exchange (NEPSE). Also we have studied the share preferences of the shareholders to

understand what motivates a shareholder to invest in particular shares which help us to know

what fluctuates the share price. So, the unit of analysis here will be individuals owning equity

shares as well as 45 listed companies.

Validity and Reliability

Validity is one of the main concerns with research. "Any research can be affected by different
kinds of factors which, while extraneous to the concerns of the research, can invalidate the
findings" (Seliger & Shohamy, 1989).

The reason why the questionnaire is chosen is because it “can be custom designed to meet the
objectives of almost any type of research project” (McNabb, 2002). A questionnaire can be
used to gather information among a large number of respondents or from small groups of
samples, so this instrument is suitable for the research.

Further, the data that is to be used in this research will be collected from official sources that
is Nepal Stock Exchange (NEPSE) and respective websites of the mentioned banks.
Further, the data analysis method proposed is already a validated measure which will be done
through SPSS.
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To determine if there is a significant difference between the dependent variable and

independent variable, which may be related in certain features, t -test is used. The t-test is one
of many tests used for the purpose of hypothesis testing in statistics.

Also an F-test is any statistical test in which the test statistic has an F-distribution under the
null hypothesis. It will be used when comparing statistical models that have been fitted to a
data set, in order to identify the model that best fits the population from which the data were
sampled.

Variables

The financial indicators and variables used in this study are defined as follows:

Market Price Per Share (MPS)

Market price per share is the closing price of the stock on which the stock has been traded in

Nepal Stock Exchange Ltd. during study periods. Market price per share is the dependent

variable in this research model.

Dividend Per Share (DPS)

Dividend per share is the part of earnings distributed to the common shareholders holding

one share. In other words, dividend per share is the net earnings distributed to common

stockholders divided by the number of ordinary shares outstanding.

Dividend Payout Ratio (DPR)

The dividend payout ratio measures the percentage of net income that is distributed to

shareholders in the form of dividends during the year. In other words, this ratio shows the

portion of profits the company decides to keep to fund operations and the portion of profits

that is given to its shareholders.

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Population and Sample

The population of this study includes Commercial Bank, Development Bank, Finance

Company, Micro Development Bank,Insurance Company, Hydro Power, Manufacturing &

Processing Company, Mutual Fund, Hotels and Trading Sector that are listed on NEPSE as

well as shareholders who are actively involved in buying and sharing stock in the secondary

market.

Sampling Design

The sample will consist of 5 companies each from Commercial Bank, Development

Bank, Finance Company, Micro Development Bank, Insurance Company, Hydro Power,

Manufacturing & Processing Company, Mutual Fund, 3 companies from Hotels and 2

companies from the Trading Sector. The data collected from the sample consist of secondary

data retrieved from the annual report from their respective websites.

Along with this, primary data will be based on questionnaires administered to 200

individuals owning equity shares. Convenient sampling method is used to select samples in

this study since it is not reasonable to study all of them since all these companies have no

practice of dividend culture. So, this study concentrates only on 45 companies and their

trends of dividend and stock price fluctuation from 2014/15 to 2018/19 as stated in Table 1.

Measures

The questionnaire is designed using nominal scale. A nominal scale is a scale of

measurement used to assign events or objects into discrete categories. To perform statistical

analysis of data, it is important to first understand variables and what should be measured
 18

using these variables. Nominal scale possesses only the description characteristic which

means it possesses unique labels to identify or delegate values to the items.

Research Procedure

The research procedure includes administration of the questionnaire, data processing and

analysis of the data.

Administration of the Questionnaire

The questionnaires are asked to different investors who are actively invested in the share

market. Total of 10 questions are asked to the investors to know about their buying behaviour

and what motivates them to invest in a particular stock. Demographic questions will not be

asked as it is not helpful for our research. Only straight forward and on to the point questions

will be asked to minimize the time taken to complete the questionnaire.

We have used nominal scale as it is easy to generate responses using close ended

questions and a lot of responses can be collected in a short period of time. We will be asking

questions in Nepali to those who have difficulty answering in English and those who want to

answer in English can do that too.

We will be distributing the questionnaires to around 200 investors as we need at least 100

responses to generalize the finding. The completed questionnaire will be collected on the

same day it was distributed as the questionnaire includes 10 questions which could be filled

out within 15 minutes.

Data Processing
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After collecting the information from the investors each answer collected from the

given questionnaire will be analysed. The responses of each individual respondent will be

recorded into IBM SPSS 21 for Windows statistical software. Then regression analysis will

be done which will help us to know about the relation that exists between dividend and share

price. Here we will find linear regression in SPSS software where the dependent variable is

stock price and independent variable is dividend. We will be selecting the confidence interval

of 95% with model fit. The process of data is very important to find out accurate findings of

the research.

Data Analysis

The analysis of data has been done according to the pattern of data available. Firstly, the

collected data are presented in proper forms, grouped in various tables and charts according

to their nature. Then statistical tools and financial tools will be applied. Financial tools and

simple regression analysis, multiple regression analysis and Hypothetical tests will mainly be

the tools of analysis. The relationship between different variables related to study topics

would be drawn out using financial and statistical tools.

Financial Tools

The financial indicator for share price volatility and main measurement of dividend

policy is calculated. The various financial tools that will be used in the research to understand

about the dividend policy and share price are:

Dividend Payout Ratio (DPR)

Dividend yield
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Statistical Tools:

A brief explanation of statistical tools used in this study is as follows:

Standard deviation

The standard deviation shows the absolute dispersion which measures scatteredness of the

data of figures in a series about an average. The greater amount of dispersion reflects the high

standard deviation. A small standard deviation means a high degree of uniformity of

observation as well as homogeneity of a series and vice-versa (Neupane, 2017).

Standard Deviation (σ ) =

Multiple Regression Analysis

After regression analysis is done we will be analysing if there exists the relation and

come to the findings of the research done as it acts as statistical evidence. The result will

show if there is any significance.

Limitations

This research proposal focuses only on one independent variable ‘dividend’ that can

impact the market share price. Many other independent variables like return on earnings

(ROE), interest rate, price/ earning ratio are not considered. There are qualitative

characteristics as well which can influence the stock price of the firm such as the political

factors, legal factors, merger and acquisitions, expansion of the company.

Similarly, quantitative factors like company size, age, goodwill, market to book value,

CEO tenure, CEO duality among others can influence the share price apart from the dividend.

In the future, a study could be carried to determine their combined effect and their
 21

relationship with the share price. Also, we have selected 200 shareholders through

convenience sampling so samples could have sampling error and may have selection bias.

References

Adhikari, N. (2014). Managers' views on dividend policy of Nepalsese enterprises. NRB

Economic Review. 26(1), 98-104.

Bamidele, M. (2018). The Effect of Dividend Policy on Stock Price in Nigeria. Danubius

Journal, 14, (6), 55-71.

Black, F., & Scholes, M. S. (1976). The Dividend Puzzle. The Journal of Portfolio

Management, 2, 5-8.

Black, F., & Scholes, M. S. (1974). The Effects of Dividend Yield and Dividend Policy on

Common Stock Prices and Returns. Journal of Financial Economics, 1, 1-22.

Chhetri, G.R. (2008). Dividend and Stock Prices: A Case of Nepal. An unpublished M.Phil.

thesis submitted to Tribhuvan University.

Dhungel, A. (2013). Impact of Dividend on Share Pricing in Commercial Banks of Nepal.

Banking Journal, 3,(2), 31-32.

Elton, E.J. & Gruber, M.J. (1970). Marginal Stockholders Tax Effect and the Clientele

Effects. Review of Economics and Statistics, 52, 68-74.

 22

Friend. I., & Puckett, M. (1964). Dividend and Stock Prices. American Economic Review, 54,

656-682.

Gitman, L. J., & Zutter, C. J. (2015). Managerial Finance, ninth edition. The Dryden Press,

Harcourt Brace Jovanovich, USA.

Gordon, M.J. (1963). Optimal investment and financing policy. The Journal of Finance,

18(2), 264-272.

Irandoost, R., Hassanzadeh, R., and Salteh, H. (2013). The effect of dividend policy on stock

price volatility and investment decisions. European Online Journal of Natural and

Social Sciences, 2(3), 51-59.

Irwin friend & Marshall pocket (1964). Dividend policy and stock prices, The American

Economic Review

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Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial Behavior, Agency

Costs, and Ownership Structure, Journal of Financial Economics, 4, 305-360

Joshi, Rabindra (2012). Effects of Dividends on Stock Prices in Nepal . Nrb.org.np, 24-2.

Manandhar, K. D. (1998). A Study of Dividend Policy and Value of the Firm in the Small

Stock Market: A Case of Nepal. Management Dynamics, 8(1), 15-20.

Masum, A.A. (2014). Dividend Policy and Its Impact on Stock Price–A Study on

Commercial Banks Listed in Dhaka Stock Exchange. Global Disclosure of

Economics

and Business, 3(1)

McNabb, D. E. (2002). Research methods in public administration and nonprofit

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management: quantitative and qualitative approaches. M.E. Sharpe.

Miller, M.H. & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares.

The Journal of Business, 34(4), 411-433.

Myers, S. (1984). The Capital Structure Puzzle. The Journal of Finance,39, 28-30.

Pradhan, R. S. (2003). Effects of Dividend on Common Stock Prices: The Nepalese evidence.

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University Press

Silver, C. (2020, May 18). How and Why Do Companies Pay Dividends? Retrieved May 25,

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Walter, J. E. (1963). Dividend Policy: Its influence on the value of the enterprise. Journal of

Finance,18,(2),280-291.

Appendix

Questionnaire

Please tick your answer

1. What is your experience in the Stock Market (NEPSE trading)?

A. Zero days to 1 Year

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B. More than 1 Year but less than 2 Years

C. More than 2 Years but less than 5 Years

D. More than 5 years but less than 10 Years

E. More than 10 Years

2. In how many companies you have invested in?

A. Less than 5

B. 5 to 10 companies

C. 10-15 companies

D. 15-20 companies

E. More than 20

3. What is your mode of investment?

A. Primary market

B. Secondary market

C. Both

4. What do you consider the most before investing in the particular stock ?

A. High rate of earning

B. Liquidity of the stock

C. Value Appreciation of share price

D. Dividend distributed

E. Reputation of the company

F. Don't really look anything

5. What do you consider while operating in the Primary market?

A. Industry/Sector to which the company belongs

B. Prestige of the company

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C. Board of directors

D. Risk factors

6. What is your perception on factors influencing the investment decision in the secondary

market?

A. Change in government policy

B. Advice of brokers

C. News portal’s suggestions

D. Advice of share market’s websites

E. Movement of share price and indices

F. Market sentiments

7. What are the motivating factors in the selection of the share?

A. Dividend

B. Capital gains

C. Bonus shares

D. Rights shares

E. Tax benefits

F. Less risk

G. Liquidity

8. What is your objective behind investing on shares?

A. Future security

B. Expected return

C. Liquidity

D. Capital gain

E. Others
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9. What do you think are the factors of investment?

A. Book value

B. Market value

C. High-low price

D. Earning per share

E. Price earning ratio

F. Market capitalization

10. What are the reasons for investment in IPOs?

A. Dividend purpose

B. Capital gain

C. Others

Table 1
Sample Companies
Sector Company
Commercial Banks NMB Bank Limited
Siddhartha Bank Limited
Nepal Credit & Commerce Bank Limited
Kumari Bank Limited
Laxmi Bank Limited
Development Bank Miteri Development Bank Limited
Garima Bikas Bank Limited
Jyoti Bikash Bank Limited
Karnali Development Bank Limited
Gandaki Bikas Bank Limited
Finance Nepal Finance Limited
Best Finance Company Limited
Lalitpur Finance Limited
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Goodwill Finance Company Limited

Pokhara Finance Limited
Hotels Soaltee Hotel Limited
Taragaon Regency Hotel Limited
Oriental Hotel Limited
Hydro Power National Hydro Power Company Limited
Butwal Power Company Limited
Chilime Hydro power Company Limited
Arun Valley Hydropower Development Company Limited
Sanjen Jalavidhyut Company Limited
Life Insurance National Life Insurance Company Limited
Nepal Life Insurance Company Limited
Life Insurance Corporation Nepal Limited
Asian Life Insurance Company Limited
Prime Life Insurance Company Limited
Trading Salt Trading Corporation Limited
Bishal Bazar Company Limited
Mutual Fund Nabil Balanced Fund-1
Siddhartha Equity Oriented Scheme
NMB Sulav Investment Fund-1
NIBL Samriddhi Fund 1
Laxmi Value Fund-1
Micro finance Nirdhan Utthan Laghubitta Bittiya Sanstha Limited
Chhimek Laghubitta Bittiya Sanstha Limited
Deprosc Laghubitta Bittiya Sanstha Limited
Swabalamban Laghubitta Bittiya Sanstha Limited
Nerude Laghubitta Bittiya Sanstha Limited
Manufacturing Bottlers Nepal Limited (Balaju)
Nepal Lube Oil Limited
Bottlers Nepal (Terai) Limited
Unilever Nepal Limited
Shree Ram Sugar Mills Limited