A THESIS PROPOSAL

DIVIDEND POLICY: A COMPARATIVE STUDY OF JOINT VENTURE COMMERCIAL BANKS IN NEPAL By: Mira shrestha POST GRADUATE CAMPUS BIRATNAGAR T.U. Registration No.-:7-1-3-114-96 A Thesis Submitted to: Office of the Dean Faculty of Management Tribhuvan University In partial fulfillment of the requirements of the degree of Masters of Business Studies (M.B.S) Biratnagar, Nepal. September, 2010.

TRIBHUVAN UNIVERSITY FACULTY OF MANAGEMENT POST GRADUATE CAMPUS Biratnagar, Nepal Phone: 021-471205 Ref. No 021-471327 RECOMMENDATION This is to certify that the thesis: Submitted by Mira Shrestha Entitled “Dividend Policy: A comparative study of joint venture commercial banks in Nepal” has been prepared and approved by this Department in the prescribed format of Faculty of Management. This thesis is forwarded for examination. Supervisor Head of department Hiranya Prasad Gautam Dr. Khagendra Archarya …………………….. ………………………... Campus Chief Harihar Bhandari ….............................

Date: ………………. TRIBHUVAN UNIVERSITY FACULTY OF MANAGEMENT POST GRADUATE CAMPUS Biratnagar, Nepal Phone: 021-471205 Ref. No 021-471327 VIVA-VOCE SHEET We have conducted the viva-voce examination of the thesis presented by Mira Shrestha entitled “Dividend Policy: A comparative study of joint venture commercial banks in Nepal” and found the thesis to be original work of the student and written according to the prescribed format. We recommend the thesis to be accepted as partial fulfillment of the requirement for Master’s Degree in Business Studies (M.B.S) Viva- Voce Committee: Chair Person Research Committee : ………………………………………………. Member [Thesis Supervisor] ( Hiranya Prasad Gautam ) : ………………………………………………. Member [External Expert] : ……………………………………………….. Date: ………………...

DECLARATION I hereby declare that the work reported in this thesis entitled “Dividend Policy: A comparative study of joint venture commercial banks in Nepal” submitted to Post Graduate Campus, Faculty of Management, Tribhuvan University, is my original work done in the form of partial fulfillment of the requirement of the degree of Masters of Business Studies under the supervision of Hiranya Prasad Gautam Associate Professor, Post Graduate Campus, Biratnagar, Tribhuvan University. Mira Shrestha Researcher Roll No. 182 T.U. Reg. No. 7-1-3-114-96.

ACKNOWLEDGEMENT “Education is the of the overall development” It is indeed gratifyig to say that I have been the student of P.G. Collage, Biratnagar. I have great pleasure in presenting my Report “Dividend Policy of Nabil Bank Ltd, Everest Bank Ltd. and Nepal SBI Bank.” As a partial fulfillment for the degree of the masters in business studies. The completion of this report would not have been possible without the help and support of many people and I am highly accredited to them all. I hardly proceed the acknowledge and great honour to my thesis supervisor Mr. Hiranya Prasad Gautam for providing orientation, giving valuable suggestion, untiring support, guidance and encouragement throughout this studies from the designing phase to its completion. I am grateful to all my colleagues, staff of library and administration of post graduate campus, Biratnagar who helped me directly and indirectly in completing this research work. I must particularly thank my husband Mr. Madan Shrestha for his kind co- operation, support and collaboration. Finally, I would like to thanks Ashwin Shrestha and Bishal Shrestha for typing and computerizing the whole thesis to complete this thesis. Mira Shrestha Biratnagar october, 2010.

TABLE OF CONTENTS Pages Recommendation I Viva-Voce Sheet II Declaration III Acknowledgement IV Abbreviations V Table of Contents VII Chapter 1: INTRODUCTION 1 – 10 1.1 General Background 1 1.2 History of Bank 4 1.2.1 Commercial Banks 6 1.2.2 Joint Venture Banks 8 1.2.3 Role of JVB in Nepal 9 1.2.4 Brief Profile of Sampled Bank 10 1.3 Focus of the study 12 1.4 Statement of problem 13 1.5 Objective of the study 15 1.6 Significance of the study 15 1.7 Limitation of the study 16 1.8 Research Methodology 16 1.9 Organization of the study 17.

CHAPTER 2: REVIEW OF LITERATURE 19-40 2. Review of Literature 19 2.1 Conceptual Framework 19 2.1.1 Forms of Dividend 21 2.1.2 Theorie of Dividends 22 2.1.3 Factors Affecting Dividend Policy. 25 2.1.4 Legal Provisions Regarding Dividend Practice in Nepal. 27 2.2 Review of Studies on Dividend Policy 28 2.2.1 Linters Study 28 2.2.2 F. Modoglani and M.H.millers Study 29 2.2.3 Myron Gordon’s Study 33 2.2.4 Walter’s Study 34 2.2.5 Van Horne and MC Donald’s Study 36 2.2.6 Mark E. Holder, Frederick W.Langrehev 37 and J.Lawrence Hecter’s Study. 29 2.2.7 Deepak Chawla and G. Srinivasan’s Study. 39 CHAPTER 3: RESEARCH METHODOLOGY 41 - 51 3. Research Methodology 41 3.1 Research Design 41 3.2 Population and Sample 42 3.3 Sources of data 43 3.4 Data Collection Procedure 43.

3.5 Method of Analysis 43 3.5.1 Financial indicators and variables 44 3.5.2 Test of Hypothesis 46 3.5.3 Statistical Tools Used 47 CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 52 - 71 4. Presentation and Analysis of Data 52 4.1 Analysis of Financial Indicators and Variables 53 4.1.1 DPS Analysis 53 4.1.2 EPS Analysis 54 4.1.3 Price Earning Ratio Analysis 56 4.1.4 DPR Analysis 57 4.1.5 MVPS Analysis 59 4.1.6 DY Analysis 60 4.2 Correlation Analysis 64 4.2.1 Correlation between MVPS and DPS 64 4.2.2 Correlation between MVPS and EPS 65 4.2.3 Correlation between MVPR and DPS 65 4.2.4 Correlation between MVPS and P/E Ratio 66 4.2.5 Correlation between MVPS and Dividend Yield 66 4.3 Regression Analysis 66 4.4 Test of Hypothesis 67 CHAPTER 5: SUMMARY, MAJOR FINDINGS,.

CONCLUSION AND RECOMMENDATION 72 - 75 5.1 Summary 72 5.2 Major Findings 73 5.3 Conclusion 74 5.4 Recommendation 74 BIBLIOGRAPHY APPENDICES.

LIST OF ABBREVITION a - Constant (intercept) of Regression. b - Coefficient (slope) of Regression. B.S - Bikram Sambat C.V. - Coefficient of Variation. d.f - Degree of freedom. DPR - Dividend Payout Ratio. DPS - Dividend Per Share DY - Dividend Yield. EPS -Earning Per Share. EBL - Everest Bank Limited. FY - Fiscal Year MPS - Market price per share. MVPS -Market value per share. NIBL - Nepal Investment Bank Limited. No. - Number NSBL - Nepal SBI Bank Limited. Pe - Probable Error P/E Ratio - Price earning ratio. r - Correlation r2 - Coefficient of determination.

SAFTA -South-Asia Free Trade Area. SCBL - Standard Chartered Bank Limited. SD - Standard Deviation SEE/SE -Standard error of estimation Viz. -Namely WTO -World Trade Organization NABIL –Nepal Arab Bank Limited..