Studies Related to Dividend

Shrestha (2016) in his article “Shareholders” Democracy and annual General meeting Feedback” has dealt with the policies and financial performance of some financial companies and has made the following outcomes

·         The cost-push inflation at exorbitant rate has made the shareholders to expect higher return from   their investment.

·         Multiple decreases in the purchasing power of the Nepalese currency to the extent that higher return by the way of dividend is just a natural economic consequence of it.

·         Erosion in the purchasing power of the income has made it clear that dividend payment must be directed to enhance shareholders’ purchasing power by raising dividend payout ratio on the basis of both earnings and cost theory.

·         Indo-Nepal trade and transit deadlock has become a sort of economic warfare putting rise in the cost of living index to a considerable extent. This is one of the reasons, which made shareholders to expect higher demand for satisfactory dividend.

·         The waiting of five years with peanut dividend in previous year is equally a strong enforceable reason of the bank’s shareholders to expect handsome dividend already assured and committed in various reports of the earlier annual general meeting.

·         One way to encourage risk-taking ability and preference is to have proper risk-return trade off by bank’s management board in a way that higher return must be the investment rule for higher risk-takers that comprise bank’s shareholder.

Pradhan  (2017) in his articles “Stock market behaviors in a small market: A case of Nepal"  has conducted a study on small market Behavior  in A Small Capital Market : A Case of Nepal in 2016. It is pertinent to put forth here because he has analyzed various ratios related to dividend and market price of shares. The study was based on the pooled-cross sectional data of 17 enterprises.

The objectives of this study were as follows:

·         To assess the stock market behavior in Nepal.

·         To examine the relationship of market equity, market value to book value, price-earning , and dividends with liquidity, profitability, leverage, assets turnover and interest coverage.

Some findings of his study, among others, were as follows:

i)              Stocks with larger ratio of dividend per share to market price per share have higher liquidity. Liquidity position of stocks paying lower dividends is also more variable as compared to stock paying higher dividends.

ii)            Stocks with larger ratio of dividend per share to market price per share have lower leverage ratios. So, leverage ratios of stocks paying smaller dividends are also more variable as compared to stocks paying higher dividends.

iii)          Stocks with larger ratio of dividend per share to market price per share also have higher earnings. But these earning ratios of stocks paying larger dividends are also more variable as compared to stocks paying smaller dividends.

iv)          Positive relationship is observed between the ratio of dividend per share to market price per share and turnover ratios. Stocks with larger ratio  of dividend per share to market price per share also have higher turnover ratios. Turnover ratios of stocks paying larger dividends are also more variable than that of stocks paying larger dividends are also more variable than that of stocks paying smaller dividends.

v)            There is also positive relationship between the ratio of dividend per share to market price per share and interest coverage. Stocks with higher ratio of dividend per share to market price per share also have higher interest coverage. Interest coverage stocks paying larger dividends is also more variable as compared to stocks paying smaller dividends.

vi)          So, in conclusion, it indicates positive relationship of dividend per share to market price per share with liquidity, profitability, assets turnover and interest coverage; and negative relationship with leverage.

Sharma (Rajopadhaya) (2012) conducted a research on “Dividend policy with respect to insurance companies in Nepal”. The objectives of this research were;

·         To identify the existing practice of dividend policy in insurance companies.

·         To find out the impact of dividend per share of the market price of the stock.

·         To examine whether there is significant different or not among DPS,EPS and DPR on the selected companies.

·         To know if there is any relationship between market value per share (MVPS) ON dividend policy and other financial indicator such as DPS, EPS, DPE, PE Ratio, liquidity ratio.

Some major Findings of the study are pointed out as:

a.       The average DPS and EPS of NLGICO and NICO is satisfactory compared to ICO and UICO.

b.      The insurance companies are new in dividend distribution.

c.       The analysis of coefficient of variation indicates largest fluctuation in PICO and UICO.

d.      The dividend is fluctuation in all sample in all sample insurance companies.