DIVIDEND POLICY ANALYSIS OF

NABIL BANK LTD. AND EVEREST BANK LTD.

A PROJECT REPORT PROPOSAL

Submitted by
Manisha Pandey
Roll. No.:
T.U.Reg No.:7-2-305-36-2019
Finance Group
Panini multiple campus
Sandhikharka, Arghakhanchi

Submitted to
The Faculty of management
Tribhuvan University
Kathmandu
In the partial fulfillment of the requirements for the Degree of
BACHELOR OF BUSINESS STUDIES (BBS)

3 July 2024
 TABLE OF CONTENTS

Page no.
Title page I
Table of contents II
Abbreviations III
1. Background of the Study 1
2. Profile of Organizations 2
3. Statement of problem 2
4. Objectives of the Study 3
4. Rational of the Study 3
5. Literature Review 3
6. Research Method 5
7. Limitations of the Study 6
8. Chapter plan 6
9. Bibliography 7

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 ABBREVIATIONS

BFIs Bank and financial institutions

CSR Corporate Social Responsibility
CV Co-efficient of Variation
DPS Dividend per share
DY Dividend yield
EP Market price of the share at the end of the
year
EPS Earning per share
EY Earning yield
HPR Holding period rate of return
INGOs International Non-Governmental
Organizations
Ltd Limited
MPS Market price per share
NGOs Non-Governmental Organizations
NRB Nepal Rastrya Bank
ROA Return on assist
SD Standard deviation
& And
% Percent

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1.1 Background of the Study
Nepal is a landlocked country in South Asia and is bordered by China and
India. It is located in the Himalayas and contains eight of the world's ten
highest peaks. The government system is a federal democratic republic; the
chief of state is the president, and the head of government is the prime
minister. Nepal has a traditional economic system in which the majority of
the population engages in subsistence agriculture, and the allocation of
available resources is made on the basis of primitive methods.
Financial Management has undergone through various change during the
past center. Finance was studies as a part of economies before but in the
early 19th century, it developed as a separate. Field to study with the
development of industry location in 20th century. Most of the European
Countries were oriented towards industrialization. Financial management is a
file acquisition, management and financing of resources for firms’ due
regards for prices in external economic market. It is not only concern with
collection of capital but also with proper allocation of those capitals into
productive areas.
Financial analysis is detailed study or examination of financial statement of
any financial institution to analysis its comparative strengths and weakness.
Financial statement is annual document prepared by the organization for
periodic review on the progress made by the organization. Financial analysis
provides information relation to the liquidity position, stability position and
composition of income & expenditure of the corporate firm. The analysis
provides different information’s to different users such as investors,
government and management. This analysis also provides information about
the dividend policy. A dividend is the distribution of some of a company's
earnings to a class of its shareholders, as determined by the company's board
of director. Common shareholders of dividend-paying companies are
typically eligible as long as they own the stock before the ex-dividend date.
Dividend payments follow a chronological order of events and the associated
dates are important to determine the shareholders who qualify for receiving
the dividend payment.

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 2. Profile of Organizations
A. Nabil Bank ltd.
Nabil Bank Limited, the first foreign joint venture bank of Nepal, started
operations in July 1984. Nabil was incorporated with the objective of
extending international standard modern banking services to various sectors
of the society. Pursuing its objective, Nabil provides a full range of
commercial banking services through its 268 branches across the nation and
over 200+ reputed correspondent banks across the globe.

B. Everest Bank ltd.

Catering to more than 14 lacs customers, Everest Bank Limited (EBL) is a
name you can depend on for professionalized & efficient banking services.
Founded in 1994, the Bank has been one of the leading banks of the country
and has been catering its services to various segments of the society. With
clients from all walks of life, the Bank has helped the nation to develop
corporately, agriculturally & industrially.
Joint Venture Partner
Punjab National Bank (PNB), India’s first Swadeshi Bank, commenced its
operation on April 12, 1895 form Lahore and was the first bank purely
managed by Indian with Indian Capital. During the long history of the Bank,
9 banks have been merged with PNB.

3. statement of problem
Banks generate their profit by mobilizing its deposit by providing short term
and long-term loans. beside this, it can gain profit by investing productive
resources multination sector. The NABIL bank and everest bank are the
leading banks in Nepal, which is earn profit since its establishment. The
study aims to find out the answer to the following some questions.

1. What is the dividend policy of NABIL bank and Everest bank ltd. ?
2. What is the trend of dividend paid over the period ?

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4.Objectives of the Study
The objective of the study will be given below:
i. To evaluate about the dividend pattern of Nabil bank ltd. and Everest
bank ltd.
ii. To elaborate the dividend distribution position of the Nabil bank ltd.
and Everest bank ltd.

5. Rationale of the Study

In the changing peace, the number of commercial banks in Nepal is in an
increasing trend. Dividend trend shows the capacity of banks to pay dividend
for investor. It depends upon the performance of the commercial bank. The
number of financial institutions in Nepal is in an increasing trend. Nabil and
Sanima Bank are A-Grade commercial bank among all financial institution.
i. Importance to the management
ii. It could be valuable asset for library.

6. Literature Review
The literature review section of the study covers the overview of the Nepal
banking system and capital requirement, the theoretical and empirical studies
review in the areas of financial performance of commercial banks of Nepal.
Moreover, it presents the variable summary and conceptual framework as
well as the knowledge gap and conclusion.

6.1 Conceptual review

In this section researcher will provide a critical analysis of the most relevant
theories, from the classical to the modern approaches, also presenting the
theoretical concepts of the studied field, the definition of the main variables,
as the main theories and researches relating the financial performance of
commercial banks.
(Business, 2021) states that Establishing a dividend policy is one of the most
important things you can do when it comes to your company’s finances. It
communicates your company’s financial strength and value, creates goodwill
among shareholders, and drives demand for stocks. A solid policy balances
the interests of your shareholders, who want to maximize their investment
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returns, with those of your organization, which wants to ensure future
financial 6 success and growth. It gives clear direction for how your
company’s profits will be allocated and aligns with your organization’s goals
to ensure your money matches your mission.

(Adam Enebrand, 2018) theorized that this could be explained by investors

preference of how and when to receive their returns. From an investor's
standpoint, high dividend firms are certain short-term gains while low
dividend firms are more uncertain long-term gains. This notion was based on
the bird-in-the-hand argument that investors are risk-averse and willing to
give up some of the return in exchange for certainty, therefore they put a
premium on returns today, dividend, over stock price appreciation tomorrow.
Applying this argument to the research leads to the conclusion that those
investing in high dividend firms avoid uncertainty by receiving part of their
return in dividend. The investors of high dividend firms are keen on
investing based on current firm performance and less on future potential
gains. Thus, a stronger correlation between firm performance and stock
price.

6.2 Review of related studies

Uncertainty means ambiguous, unclear situation. It also means discrepancy
in information. High level of uncertainty would cause management of firms
to be defensive and take precautionary measures which may cause
management to save money for future and may decrease the chances to
payout dividend. Management can convince shareholders in this situation too
by arguing about complexity in the environment and changing situations.
Management of a firm, as supposed in agency theory (Jensen & Meckling,
1976) is selfish and watch its self-interest which is their job, salary, and
benefits. Management thus would avoid any uncertainty that might lead to
future business failure which will affect their lives. Management would thus
be keen to save money or invest it somewhere to get a return in the future to
avoid uncertainty. This may lead them to not pay any due dividend. Previous
research on the related topic has shown that cash flow uncertainty is an 9
influencing factor toward dividend policy. Cash flow uncertainty affects
dividend payout policy among agency conflict, investment opportunities, and
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capital mix (Chay & Suh, 2009). Walkup (2016) find that uncertainty
significantly affects the firms’ dividend payout policy. As market uncertainty
increases, firms with low cash flow levels tighten dividend policy to
conserve cash while firms with high cash flow levels become opportunistic
through the use of share repurchases. The literature points out that
uncertainty can be specific that affect the adoption of financial decisions,
rather than something categorized as general (Dixit, Dixit, Pindyck, &
Pindyck, 1994). Therefore, uncertainty needs to be analyzed properly before
making the dividend payout decision.

7. Research Method
Research methodology is the research method used to test the hypothesis. It
sequentially refers to the various steps to be adopted by a researcher in
studying a problem with certain objectives in view. In other words, research
methodology describes the methods and process applied in the entire subject
of the study. Generally, it refers to the numerous processes adopted by the
researchers during the research period. It is the technique to solve the
research problem in systematic manner. It includes many techniques and is
crucial for every research work.

7.1 Research design

Research design is the set of methods and procedures used in collecting and
analyzing measures of the variables in the research problem. It may be
qualitative, quantitative, descriptive, correlation etc. The researcher has used
descriptive as well as analytical research design in the study.
7.2 Population and Sample
In this study the researcher has selected accounting system of financial
institution in commercial banks of Nepal. There are 20 commercial bank in
Nepal, they are population and among them Nabil bank and Everest Bank are
selected as sample of the basis of dominance.

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8. Limitations of the Study
• The study has covered latest five years of data starting from FY 2075/076
to 2079/080 only.
• The study has used secondary sources of data only.
• Due to the use of secondary data the validity of the study is depend upon
the validity of the secondary data.
• The study is concerned with Nabil bank and Everest bank only therefore
the results of the study cannot be generalized to others banks and
organization.

9. Chapter Plan
The chapter plan will be as per the requirements and guideline for the
preparation of BBS research project report by Tribhuvan University.

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 Bibliography:
Adam Enebrand, T. M. (2018). Dividend policy and its impact on firm. Thesis,
Jonkoping International Business School, Sweden.
Business. (2021, 10 19). Western Governors University. Company Dividend
Policy Basics .
H. Kent Baker, R. W. ( 2015, 2 9). Corporate dividend policy. Emerald Insight.
Kazmierska-Jozwiak, B. (2015). Determinants of Dividend Policy: Evidence
from Polish Listed Companies. Science Direct, 473-477

Books:
Baker, H.K. Farrelly, G.E. and Edlemen, R.B.(1985). Financial Management,
Home Wood. Richrd d. Irwin Inc.
Gitman, Lawrnce J. (1994). Principle of Mangagerial Finance. 7th Edition New
York. Harper Collins College Publisher.

Website:
www.nrb.org.np
www.nabilbank.com
www.turesearch.com
www.everestbank.com