Behavioral Factors Influencing Stock Investment Decision of Individuals

Purpose: The purpose of this study is to identify the behavioral factors influencing individual investors’ decisions and to analyze the relationship between these factors and investment decision performance. Design/Methodology/Approach: The tested variables were: Anchoring bias, Gambler’s Fallacy, Overconfidence bias, Availability and Representativeness bias from heuristics factor, Mental Accounting, Loss and Regret Aversion from prospect factor, and Market variables and Herding factors. The study employed exploratory and confirmatory factor analysis. In addition, structural equation modeling is applied for the testing of the hypotheses. Findings: Prospect behavioral factor is seen to have negative correlation to investment performance. Herding, Market variables and Heuristic (including overconfidence and anchoring bias) are found to have positive correlation to investment performance. Implications: To cope with intense competition among the competitors in Nepali stock market, this study provides strong evidence herding and heuristic approach that have positive indication to investment performance

Promoting Effective Managerial Communication on Banking Sector in Kathmandu Valley: Cross Sectional Analysis

Purpose: Efficient managerial level is crucial to any organization for well function and betterment of the organization. Likewise, managerial communication is essential to build good relationship among managers to their subordinates. Proper communication in banks further helps to assist employees, creating sense of mutual respect and favorable working environment. This study aims to identify strategy for promoting effective managerial communication in banking sector in Kathmandu valley. Research Design/ Methodology: A descriptive cross-sectional research design has been applied for this study where 405 managers (383 branch managers and 22 operating managers) of commercial Banks in Kathmandu Valley were taken as a sample using structured questionnaire survey using KOBO Toolbox. This study develops and uses Managerial communication index to identify the communication skills of managers in banking communication and decision making. Findings: Managerial Communication Index value shows that managers of banking sector in Kathmandu valley are highly aware of managerial communication in terms of identity factors, negotiation and adaptation, and decision making. Brining clarity while giving speech or talking (69.13%), regularly gathering feedback for improvement (16.54%) and changing behavior and perception when necessary (12.34%) are some of the management strategies identified for promoting effective managerial communication. Conclusion: Hence, the study concludes that bank managers must properly disseminate the information to its stakeholders which will help to convey message effectively leading clarity in the work and enhancing productivity. Recommendations: The paper recommends that there should be inclusive climate in the workplace. Further, policies supporting communication should be forwarded. Originality: This article is original and there is no potential conflict of interest with respect to research and publication of this article.

A systematic review of dividend policy in relation to stock price volatility

When it comes to determining a dividend policy that would maximize shareholder value, focusing merely on how much of the firm’s profit is necessary for dividend distribution and reinvestment is insufficient. It is critical to analyze the impact of their dividend choice on the stock price.The purpose of this study is to scrutinize the impact of dividend policy on stock price volatility. The report investigated the relationship between the dividend policy and stock price volatility taking 8 articles between 2010 to 2020. Likewise, following a systematic literature review method, the study critically analyzed the selected articles based on their strengths and weaknesses. The findings suggest that, in most of the cases demonstrated by authors, dividend policy has a significant negative relationship with the stock price volatility. The stock’s price volatility often decreases after the declaration of dividend payout ratio and dividend yield. Based on the results of this study, it can be implied that, managers of manufacturing companies and banks, those listed in the stock exchange, may be able to reduce the price volatility of their stock by increasing dividend payout and dividend yield. Since the study is limited to 4 databases, further studies could include some more articles from top-rated databases that signify dividend policy in diverse sectors to derive even more accurate results.

Determinants of Bank Value: Evidence from Nepalese Commercial Banks

Commercial banks have a pivotal role in an economy as they provide easy access for firms to fulfill financing needs and help stimulate economic development. This study aims to analyze the impact of key bank-specific determinants on bank value in Nepalese commercial banks, covering 133 observations from 19 commercial banks over the period 2012/13 to 2018/19. Bank value is measured through M/B and Tobin’s Q. Size, profitability, credit risk, loan, deposit and capital are used as explanatory variables. Panel data regression models have been used for analysis purpose. The results of this paper show that profitability, deposit and loans are major determinants of bank value. Moreover, return on assets and bank deposit have positive effect on bank value whereas loan has negative explaining power on bank value. Thus, this paper concludes that Nepalese commercial banks have to pay special attention for the efficient and effective utilization of assets to increase profits and try to increase the size of deposits to increase loan portfolio. Steps and enforcement actions need to be taken by policy level authorities for effective loan management to minimize credit risk and increase bank value.

Buddha Air: The Ace Airline of Nepal

This is a case study of a pioneering airlines company in the Nepalese aviation sector. The airlines came into full operation in 1997 by flying a brand new Beachcraft-1900D for a regular sightseeing to Mount Everest. When the airlines entered the field which was opened for the private sector by the government of Nepal in the early nineties, the country’s nascent aviation sector was in a state of take-off attracting a growing number of airline companies. Despite tough competition, the company expanded its fleet from a single aircraft to seven in number in 10 years of its operation. In 2008, the company purchased two ATR-42 aircrafts under the financial assistance of the International Finance Corporations (IFC/World Bank) and added a 70-seat ATR 72-212 in June 2010. With a range of aircrafts in its fleet, Buddha Air has today spread its wings to 13 destinations, including two international (1 seasonal and 1 charter flight) and 11 domestic destinations. After more than two decades of its service to the country’s civil aviation and tourism sector, Buddha Air was recognized as “the most successful airlines” for its sustained growth as well as for the safety and satisfaction of its customers. However, it had tackled with the price war in the face of higher cost of operations as a result of the increased number of airlines in this sector. Recalling the difficult situation due to the indiscriminate price competition, the Managing Director of the airlines, said that the pricing strategy was challenging and there was a strong urge for an unfair price competition from the rivals. “The low cost strategy as pursued by our competitors was not appropriate for our company as we had relatively higher cost of operation as we owned bigger aircrafts,” he said. While the price war remained a major hurdle in its operation, an attempt to venture into international flights was another challenge it encountered for the sustained growth of the airlines.

Forecasting Stock Market Momentum in Nepal: Application of Fuzzy Logic Model

Background: Stock market experts analyse various indicators to estimate the stock market, including historical prices, economic analysis, industry analysis and company analysis, but this study uses historical prices for the NEPSE index, making forecasting more precise. Purpose: The purpose of this study is to explore short-term stock market momentum using fuzzy logic. The study also aims to establish a suitable fuzzy model to predict stock momentum, reduce the risk, and make the right investment decision. Methodology/Design: This study employed exploratory research design to understand the problem of chaotic decision making in the stock market. The mathematical method employed in this study is membership functions, which are part of fuzzy logic. This includes only the commercial banks, as it has the highest market capitalization, 53.11% of total market capitalization. Using 14-day past data as a base, the suggested fuzzy model determines the stock index’s momentum over the next 5 days. Findings: The forecasted trend value for the Nabil, Civil, and Prime Commercial bank is 0.92, 0.92, and 0.80, which shows a bullish trend. Compared to previously collected data, the findings closely reflect the expected real-world values.

The effect of intensities of comparative ease and interaction on comparative knowledge gained from online and face-to-face learning modes

The paper examined the effect of varying intensities of comparative interaction level (CIL_L) and comparative ease of attending online classes (CE_L) (viz., high, and low) on comparative knowledge gained from online and face-to-face learning modes, and existence of differences on the effect across two intensities of the covariates. Based on complete enumeration of the population of 224 management students attending the online classes at Nepal Open University, Nepal (from 22nd February to 29th March 2020), the study— by employing a binary logistic regression model— discovered the effect of comparative interaction level and comparative ease of attending online classes as significant on the comparative gain of knowledge. Further, the study found that the effect of low intensities of comparative ease of attending online classes (CE_L) and comparative interaction level (CIL_L) are lower than high intensities of comparative interaction level and comparative ease of attending online classes in finding the online classessimilar/superior as opposed to the face-to-face classes. The findings should be instrumental to the exploration of the potential pathways to ameliorate the virtual learning mode as an alternative to the face-to-face one in Nepalese higher education regime.

Test of Asymmetric Information in the Nepalese Reinsurance Market

Background: The imperfect information can cause an imbalance of power which may lead to market failure thus collection of information is very essential in today’s business world therefore, the availability of the correct and accurate information is very crucial for making sound economic decisions. Thus, information asymmetry has been a very pertinent issue where economic transaction takes place insurance market is not far behind. As, reinsurance provides huge indirect capital to the insurance industry, providing correct information’s like premium earned, claim by the insurer to the reinsurer’s for fair pricing of reinsurance premium along ensuring top rated reinsurance company remain in Nepalese insurance industry. Objectives: This study aims to examine whether there remains asymmetric information in Nepalese insurance market with reinsurer’s perspective in different portfolios such as fire, marine, motor, engineering and miscellaneous as well as combining all portfolio in aggregate. Methods: The study uses descriptive and causal relation research design. Further, the study uses secondary data of 14 nonlife insurance from 2008/09 to 2018/19 with 168 firm year observations Result: Results of the study revealed that that only in fire, marine and overall portfolios there exists strong asymmetric information. Rest of the portfolio like motor, engineering and miscellaneous there is no evidence of existence of asymmetric information. Conclusion: Existence of asymmetric information is mostly an inevitable part as one party always tries to avoid information to others for the sake of benefit. However, the existence of asymmetric information to a large extent may lead to unhealthy relations between the parties and may bring the cold war distortion of relations. Thus, the finding of the studies is beneficial to the Nepalese nonlife insurers as insurers need to provide correct and accurate information to the reinsures Implication: To cope with asymmetric information in the Nepalese insurance industry, this study provides strong evidence to provide correct and accurate information’s to the reinsurers else top rated reinsurers might withdraw their presence from the Nepalese market which will have adverse effect in the insurance industry.

Role of macroeconomic factors predicting financial performance of commercial banks in Nepal

Purpose: This study analyzes the effect of macroeconomic indicators such as domestic products, interest rate, inflation rate, and unemployment rate on the financial performance of commercial banks in Nepal. Design/Methodology: Five top commercial banks based on the financial performance were selected with stratified sampling, with secondary data of ten years. Hausman test was used to examine the endogeneity issue in the predictor variables and the effect of predicators on financial performance were estimated using OLS estimation (random effect model). Findings: The study result revealed significant influence of macroeconomic factors except the unemployment rate for estimating ROE of commercial banks in Nepal while no significant impact was revealed for ROA. Among the significant variables, GDP contributes more in predicting the financial performance of commercial banks in Nepal. Implication: As the study found significant role of macroeconomic variables to estimate ROE, bank administrators, government officials, and investors can focus in such variables, especially in GDP for competitive financial performance. They need to develop products based on macroeconomic variables. Besides, this study finds and tries to mitigate the gap in findings of previous empirical studies. Originality/value: This study contributes to the literature on macroeconomic determinants predicting financial performance of banks, more specifically in finding the gap in determining ROA and ROE within the country specific issue.

Determinants of Financial Inclusion in Namobuddha Municipality, Nepal

Financial inclusion is a priority agenda in countries like Nepal. The study seeks to determine the access to financial services, financial innovation and quality of financial services to the financial inclusion.The study is based on questionnaire surveydata with363 household respondents using a convenient sampling technique, and carried out in Namobuddha Municipality of Nepal. The moderating effect of financial literacy and control variable of demographic items have been analysed using generalised regression model. The results show that financial innovation and quality of financial services are the significant determinants of financial inclusion; financial literacy is found significant and it plays a moderating role between the variables under study. The findings revealed that the tendency of higher level of financial inclusion was influenced by gender, education level and monthly income.