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Dividend Policy of Nepalese Commercial Banks

   

Added on  2021-01-15

16 Pages4100 Words350 Views
FINAL RESEARCH PROPOSAL ON IMPACT OFDIVIDEND POLICY ON FIRM PERFORMANCE INNEPALESE COMMERCIAL BANK

Table of ContentsTITLE..............................................................................................................................................1INTRODUCTION...........................................................................................................................1I. Overview of the Research...................................................................................................1II. Background of Research....................................................................................................1III. Significance of Research..................................................................................................1PROJECT OBJECTIVE..................................................................................................................2PROJECT SCOPE...........................................................................................................................2LITERATURE REVIEW................................................................................................................2I. Impact of dividend policy on corporate performance.........................................................2II. Conceptual Framework......................................................................................................3III. Factors affecting financial performance of a firm............................................................4IV. Empirical Studies.............................................................................................................5V. Legal Provision regarding Dividend practice in Nepal.....................................................6VI. Literature Gap..................................................................................................................6RESEARCH QUESTIONS.............................................................................................................7RESEARCH DESIGN AND METHODOLODGY........................................................................7RESEARCH LIMITATIONS..........................................................................................................7TIME SCHEDULE..........................................................................................................................8CONCLUSION................................................................................................................................9REFERENCE LIST.......................................................................................................................10APPENDIX....................................................................................................................................12

TITLE“Impact of dividend policy on firm performance in Nepalese Commercial Bank”INTRODUCTION.IOverview of the ResearchA commercial bank is a financial institution that offers services to promote trade andindustry in the country. It performs functions such as accepting deposits, aid loans, provideagency services to individuals as well as companies, transfer of funds, capital issue and mobility(Commercial Bank Act, 2031). Similar to a company, a commercial bank also earns profits andrecords losses. These banks provide returns to their investors in form of dividends and reinvestthe surplus for operational efficiencies. .IIBackground of ResearchAn organization operates with an objective of wealth maximization which is governed byvarious policies and procedures formulated by management internally. One such policy is ofdividends that enlists in what proportion and procedures would a business distribute its surplusearnings to its stakeholders. A good dividend policy may make or break a business. For instance,if an organisation has a lenient dividend policy it may face working capital deficiencies. On theother hand, if the organisation is frugal in distributing its profits, the investors may lose interestin the business. However, in both cases, the ultimate effect is observed on the firm'sperformance. In order to analyse this concept at length, this report has selected to study theimpact of dividend policy on performance of Nepalese Commercial Banks listed in NEPSE fordifferent financial periods..IIISignificance of ResearchThe given research work focuses on the analysis of firm performance in relation to thedividend policy followed by Nepalese commercial banks listed on NEPSE. Dividends refer to aportion of earnings that are distributed to the shareholders of a business as per their holdings orownership. They are a type of benefit to shareholders in return of risk taken by them. Dividendpolicy guides a business to allocate these benefits among its shareholders fairly by taking intoconsideration all other variables such as working capital requirements and payment of debts.Thus, if there is a change in dividend policy it would show in the bank's performance too. This1

research shows the extent to which the impact of these policies are related to a commercialbank's performance using quantitative techniques of data analysis.PROJECT OBJECTIVEPrimarily, this research aims to discover the impact of dividend policy on financialperformance of Nepalese commercial banks listed on Nepal Stock Exchange through empiricalobservation. In addition, it also attempts to analyse current dividend policies followed by suchbanks, whether they are similar or different, frequency as well as rate at which dividends are paidto the investors and determine the factors affecting firm performance and their implications.PROJECT SCOPETo achieve the aforementioned objectives, this project will consist of using quantitativeto study the relationship between Return on Assets (ROA), Earning Per Share (EPS), Return onCapital Employed and Dividend with performance of commercial banks of Nepal throughregression analysis.LITERATURE REVIEW.IImpact of dividend policy on corporate performanceAccording to Walter (1966), a business entity is required to ponder over the fact thatwhether it would retain all its earnings for future operations or it will pay its shareholders in adefinite amount and retain the balance or provide a non-cash alternative through Scrip dividends.If the business decides to opt for the second alternative, such payments made to the shareholdersare called Dividends. These payments are based on some predefined policies or regulations thatprovide guidelines to the internal management to ensure that its paid in a fair and logical manner.Such guidelines are known as Dividend Policy. It is important to formulate the dividend policiescarefully as they help in providing the picture of organisation's success or failure over the years.This ultimately acts as an indicator for corporate performance of an organisation,whether acompany or a bank.Dividend has been a debatable topic for decades and many researchers have tried to comeup with theories to better explain the relationship between dividend policies and firmperformance. They have been explained below:Agency Theory:2

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