Analyzing the Effect of Major Financial Indicators on the Stock Prices of Nepalese Commercial Banks

This research investigates how the price-to-earnings ratio (PE ratio) and other financial indicators influence the market prices of Nepalese commercial banks. It highlights the importance of the market PE ratio in shaping investment decisions among Nepalese investors. The study utilizes multiple regression models to analyze data from five commercial banks listed on the Nepal Stock Exchange, covering 35 yearly observations from the fiscal years 2015/16 to 2021/22. The analysis reveals a significant positive relationship between the market prices of these banks and their PE ratios and book values. Other indicators, such as the dividend rate, earnings yield, and market-to-book value ratio, also show positive relationships, though their significance diminishes in certain cases. However, the study's generalizability may be limited due to the small sample size and the focus on a few financial measures specific to commercial banks. Despite this, the research offers valuable insights, particularly emphasizing the PE ratio as a key factor that Nepalese investors consider in their investment decisions. The findings are expected to be useful for investors, researchers, policymakers, and other stakeholders. JEL Classification: G11 , G12, G21, G41