Dividend Policy and its Impact on Share Price:

An Analysis
Butwal Power Company Limited

Executive Summary

Dividends are decided upon and declared by board of directors. This decision involve by
comparing the cost of paying dividend with the cost of retaining earnings. Although firms do not
have obligations to declare dividends on common stock, firms are reluctant to change their
dividend policy every year as the firms strive to meet stockholders expectation, build a good
image among investors and to signal that the firm has stable earnings to the public. There are
plenty of potential determinants for the dividend decisions. In Nepal only few public limited
companies pay dividend. In the industry there are many companies who have never paid dividend
to their investors. Practice of cash dividend and stock dividend are common in Nepal. The
payment of cash dividend by the financial institutions especially by banks is seen well than other
sectors.
The paper discusses the dividend policy of Butwal Power Company. The paper is analytical and
provides information to various individuals and investors to take rational decision while investing
in Butwal Power Company. This study would also help Nepalese investors as in Nepal investors
invest in the stock without adequate knowledge of the company and performance and dividend
policies. BPC also has paid 10% stock dividend in two consecutive years making the paid up
capital of Rs. 10.15 billion. Though there are some other companies are exists in the hydropower
business their way of doing business is different. In the financial performance comparison can be
done with them but the nature of incurring operating cost is different because BPC also involve
in the energy sale in to the local consumers which do not contribute in the net income of the
company substantially rather it has to bare the loss in this business.
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Background of the Study

After the restoration of democracy in 1990 A.D., Nepal implemented liberal economic policy.
Many companies were established in different sectors such as industrial, tourism, transportation,
trade and mostly in financial sector who contribute to build up economy of the country. Nepal is
working to develop its economy through global trend and cooperation with developed countries.
The development of an economy requires expansion of productive activities, which in turn is the
result of the capital formation, which is the capital stock of the country. Investment, which is a
capital stock of the country, is key factor for capital formation. Investment is responsible for
promoting economic growth and contributing to a nations wealth. Investor desire to earn some
return from the investment, without any return there is no any investment. Investment will block,
if there is no return. The total expected return include two components one is capital gain and
other is dividend. All company operates to generate earnings. Shareholders invest to make
money, which is paid to them in the form of dividend. Shareholders wealth can be maximized
through dividend or capital gain. Every financial manager has to decide on what will he do with
the profit earned, the ultimate choice he or she has is that wither they retain the profit within the
company, or pay out the dividend. Thus, dividends are payment made to stockholders in return of
their investment. Dividend policy is to determine the amount of earnings to be distributed to
shareholders and the amount to be retained or reinvestment in the firm. The ultimate objective of
a dividend policy should be to maximize shareholders wealth position.
On the other hand, the money retained in the company is used to make investment. In the
investment turns out favorable, the firm will grow and thus increases the wealth of stockholders.
As theories have pointed out, shareholders are greedy and always seek dividends. However, the
amount that is desirable to pay dividend is always a controversial because shareholders expect
higher dividend, but company set aside funds to invest and maximize shareholders wealth rather
than providing all the profits in dividends. Management is therefore concerned with the activities
of company that affect the well being of shareholders. That well being can be partially measured
by the dividend received, but a more accurate measure is the market value of stock. But
stockholders think dividend yield is less risky than capital gain.

Dividends are decided upon and declared by board of directors. Dividend theory and its effect on
the value of the firm is one of the most important theories in finance. As mentioned earlier, a
firms profits after-tax can either be used for dividends payment or retained in the company. This
decision generally involve by comparing the cost of paying dividend with the cost of retaining
earnings. Whichever component has a lower cost that is where the profit after-tax will flow.
Although firms do not have obligations to declare dividends on common stock, they are normally
reluctant to change their dividend policy every year as the firms strive to meet stockholders
expectation, build a good image among investors and to signal that the firm has stable earnings to
the public. Miller and Modigliani (1961) argue that the dividend decision does not affect firms
value which is irrelevant. However, financial practitioners provided alternatives regarding
dividends and firms value. There are plenty of potential determinants for the dividend decisions.
The most prominent includes protection against liquidity, after-tax earnings of the firm, liquidity
and cash flow consideration, stockholders' expectation/preference, future earnings, past dividend
practices, return on investment, industry norms, legal constraints, growth prospects, inflation and
interest rate (Foong, Zakaria and Tan, 2007).
Only few public limited companies of Nepal are paying dividend while others are not stable to
pay dividend. In the industry we can find that there are many companies who have never paid
dividend to their investors. In the context of share price, it has been observed that those
companies which has provided dividend had increase its stock price than those companies do not
pay dividend. The paper discusses the dividend policy of Butwal Power Company. The paper
would be analytical and provide information to various individuals and investors to take rational
decision while investing in Butwal Power Company. This study would also help Nepalese
investors as in Nepal investors invest in the stock without adequate knowledge of the company
and performance and dividend policies. On the other hand, BPC can also use this study to
understand investor objectives.

2 Objectives
The main objective of the study is to determine the trend and practices of dividend payment by
Butwal Power Company Limited (BPC), a pioneer company for hydropower development in

Nepal and a first company listed in Nepal Stock Exchange Ltd. (NSE). Specifically, the study has
covered the dividend paid during the period from fiscal year 2005/06 to 2010/11.
The specific objectives are:
o To examine the impact of dividend policy on market price of stock of Butwal Power
Company Limited (BPC).
o To explore has the prevailing dividend payment practice contributed on the wealth
maximization of the company.
o To identify the best policy to be adopted by the company to maximize the wealth of
shareholders and to maintain the steady share price in market

3 Limitations
1. The study is mainly concentrated on the dividend practice and its influence in prospect of
Butwal Power Company (BPC) as a requirement of course of EMBA. To make a real
decision, a thorough analysis conducted by financial manager or professional would be
needed.
2. The data being taken from secondary source, therefore authenticity of the data is dependent
on the accuracy of the information used.
3. The result and the interpretation are completely rigid and from the view point of the
researcher.
4. Among the different aspect of dividend policy cash dividend and stock dividend are taken for
the analysis

4 Review of Literature
4.1 Understanding Dividend
The term dividend is defined as a return from investment in equity shares. The profit made by the
firm which is distributed to the shareholders termed as dividend. Every firm after making profit
either retain the money for further investment or distribute it among the shareholders. The firm
should decide whether to keep the money as retained earnings or pay the dividend. It may be in
cash, shares, and combination of both. The dividend policy is the policy followed by the firm
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regarding the dividend versus retention decision. Dividend policy of different organization may
same or different, but the policy followed by the firm should be suitable for both the shareholders
as well as the firm itself.
Dividend policy decision is one of the three decisions of financial management because it affects
the financial structure, the flow of funds, corporate liquidating, and investors attitudes. Dividend
decision of the firm is a very crucial controversial area of financial management. The main aspect
of dividend policy is to determine the amount of earning to be distributed the shareholder and the
amount to be retained in the firm. When a company pays dividend, the shareholder benefitted
directly. If the company retains the funds for investment opportunities, the shareholders can be
benefitted indirectly through future increase in the price of their stock. Thus, shareholders wealth
can be increase through either dividend or capital gain. Divined policy involves the decision to
pay out earning versus retaining them for reinvestment in the firm. Any change in dividend
policy has both favorable and unfavorable effects on the firms stock price. Higher the dividend
means higher the immediate cash flows to investors, which is good, but lower future growth,
which is bad. The dividend policy should be optimal which balances the opposing forces and
maximizes stock prices. Literatures have pointed out that there is an adverse relation between
retained earnings and cash dividend. This is because shareholders what to receive returns on their
investment. When the high dividend is paid, retain earning reduces, which ultimately reduces the
opportunity to reinvest and expansion of the organization. Therefore dividend decision is one of
the major decisions of managerial finance. This decision consist the decisive decision of
choosing between distributions of profit to shareholders or investing them back into the business.
Dividend decision has great influence on financial structure, flows of funds, and corporate
liquidity. The relationship between dividend and the value of the share, however is still not clear.
Finance Manager needs to understand the factors responsible for influencing the dividend policy
before deciding the allocation of its companys earnings into dividends and retain earnings.

4.1.1

Dividend Theories

Residual theory: In this theory the first priority is given to the profitable investment opportunities. If
there are profitable opportunities, the firm invest is those and residual income (if any) is distribute to
shareholders. A Firm would treat the dividend decision in three steps: (1) determine the optimum
level of capital expenditure which would be the level generated by the point of intersection of the
investment opportunities schedule (IOS) and weight managerial cost of capital (WMCC) function, (2)
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using the optimal capital structure proportion, it would estimate the total amount of equity financing
needed to support the expenditures generated in 1 and (3) retained earnings would be used to meet the
equity requirement determined in step 21. If retained earnings are inadequate to meet this need, new
common stock would be sold. If the available retain earning are in excess to this needs, the surplus
amount would be distributed as dividends (Gitmen, 2000).
Wealth maximization theory: Under this theory, large number of dividends is announced and
distributed to shareholders. This theory, however, is applicable only to those companies which are
new to the industry and whose financial profits are decreasing. The main purpose of the wealth
maximization theory of dividend is to make assurance to the stockholders that they are interesting in
the firm, which has not better market value (Ibid).

4.1.2

Dividend Types

Stock Dividend/Bonus Share: A stock dividend occurs when the board of directors authorizes a
distribution of common stock to existing shareholders. Stock dividend increases the number of
outstanding shares of the firms stock. Although stock dividend does not have a real value, firms
pay stock dividend as a replacement for a supplement to cash dividend. Under stock dividend,
shareholders receive additional shares of the company in lieu of cash dividends. Stock dividend
requires an accounting entry transfer from the retained earnings account to the common stock and
paid in capital accounts2. This has the effect of increasing the number of outstanding shares of the
company as a result the decrease in EPS which effect the reduction in the market price of the
share. Since the shares are distributed proportionately, share holders retain his proportionate
ownership of the company.
Scrip Dividend: A scrip dividend is a distribution of surplus to the stockholders in the form of notes
or promises to pay the amount of dividend at a certain time. The notes are called dividend certificates
or scrip. Sometime companies need cash generated by business earning to meet business requirements
or with-hold the payment of cash dividend because of temporary shortage of cash. In such
circumstance the company may issue scrip dividend payable at future dates.

1 This is because of the cost of retained earnings is less than the cost of new common stocks.

2
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Bond Dividend: With the theory and concept of scrip dividend, if dividends are paid in the form of
bond (to shareholders), promising that it will mature in future date is known as bond dividend.
Therefore the intention and purpose of bond dividend is also the postponement of dividend payment
for some time. The only difference between bond and scrip dividend is that bond carries relatively
longer maturity date than scrip dividend.
Stock Split and Reverse Split: A method that is commonly used to lower the market price of a firms
stock by increasing the number of shares belonging to each shareholder. The effect of a stock split is
an increase in the number of shares outstanding and a reduction in the par, or stated, value of shares.
The total net worth of the firm remains unchanged. The stock split does not involve any cash
payment, only additional certificates representing new shares. A method that is used to raises the
market price of a firms stock by exchanging certain number outstanding shares for one new share of
stock. The effect of a reverse split is a decrease in the number of shares outstanding and an increase in
the par, or stated, value of shares. The total net worth of the firm remains unchanged. The reverse
split does not involve any cash payment, only additional certificates representing new shares. When
the market price of share of a company is falling gradually, the company may adopt reverse split
which may increase the market price of share and help to maintain efficient situation of the company.
Stock Repurchase: It is the process of repurchasing back outstanding share of any company. A
corporations repurchase of its stock can serve as a tax advantages substitute for dividend payout.
Repurchase have the effect of raising share prices so that shareholders can be taxes at the capital gain
rate instead of ordinary dividend rate on cash dividend. Company can repurchase its shares in two
ways: Open market repurchase and Tender (Offer) repurchase. Open market repurchase usually (but
not always) involve gradual programs to buy back shares over a period of time. In tender offer, the
company usually specifies the number of shares it is offering to repurchase, a tender price and a
period of time during which the offer is in effect. If the number of shares actually tendered by the
shareholders exceeds the maximum number specified by the company, then the purchases are usually
made on a pro-rata basis.

Cash Dividend: Payment by cash has been one of the most effective and common ways to pay
dividend. When a company declares cash dividend, it must ensure that it has enough cash in its
bank account. If the company doesnt have enough cash at the time of paying cash dividend,
arrangement should be made to borrow funds. Payment of cash dividend shouldnt lead to
liquidity problem for the company. When a cash dividend is paid, the cash account and the
reserve account of a company will be reduced. Both the total assets and the net worth of the
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company reduces when cash dividend is distributed. Beside the market price of the share affected
in most cases by the amount of cash dividend distributed. Cash dividend has the direct impact on
the shareholders. The volume of the cash dividend depends upon earnings of the firm and on the
management attitude or policy. Cash dividend has psychological value for stockholders. Each and
everyone like to collect their return in cash rather than non-cash means. So cash dividend is not
only a way to earnings distribution but also a way of perception improvement in the capital
market.

4.1.3

Dividend Policy

Dividend policy determines the decision of earnings between payment to stockholders and
reinvestment in the firm. Retained earnings are one of the most significant sources of funds for
financing corporate growth, but dividends constitute the cash flow that accrues to stockholders.
(Weston and Copeland, 1991).

The third major decision of the firm is its dividend policy, the percentage of earnings it pays in
cash to its stockholders. Dividend payout, of course, reduces the amount of earnings retained in
the firm and affects the total amount of internal financing. The dividend payout ratio depends on
the way earnings are measured for case of exposition, we use account net earnings but assume
that these earning can form true economic earnings. In practice, net earning may not conform and
may not be an appropriate major of the ability of firm to pay dividends (Van Horne, 2000). In
other words dividend policy refers to the issue of how much of the total profit a firm should pay
to its stockholders and how much to retain for investment so that the combined present and future
benefits maximize the wealth of stockholders. The dividend policy, however, not only specifies
the amount of dividend, but also form of dividend, payment procedure etc. Dividend policy
according to the application could be categorized as follows:
Stable dividend policy: When the firm constantly pays a fix amount of dividend and maintains it
for all times to come regardless of fluctuations in the level of its earnings, it is called a stable
dividend policy. This policy is considered as a desirable policy by the management of companies.
Most of the shareholders also prefer stable dividends because all other things remaining same,
stable dividends have a positive impact on the market price of the share. By stability, we mean
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maintaining their positions in relation to a trend live preferably one that is upward sloping. Three
of the common used dividend policies are:
Constant dividend per share: Constant dividend policy is based on the payment of a fixed rupee
dividend in each period. A number of companies follow the policy of paying fixed amount per
share as dividend every period, without considering the fluctuation in the earnings of the
company. The policy does not imply that the dividend per share or dividend rate will never be
increased. When the company reaches new level of earnings and expects to maintain it the annual
dividend per share may be increased. Investors who have dividends as the only source of their
income prefer the constant dividend policy.
Constant payout ratio: The ratio of dividend to earning is known as payout ratio. When fixed
percentage of earnings is paid as dividend in every period, the policy is called constant payout
ratio. Since earnings fluctuate, following this policy necessarily means that the rupee amount of
dividends will fluctuate. It ensures that dividends are paid when profits are earned, and avoided
when it incurs losses.
Low regular plus extra policy: The policy of paying a low regular dividend plus extras in a
compromise between a stable dividend (or stable growth rate) and a constant payout rate. Such a
policy gives the firm flexibility, yet investors can count on receiving at least a minimum
dividend. It is often followed by firms with relatively volatile earnings from year to year. The low
regular dividend can usually be maintained even when earnings decline and extra dividends can
be paid when excess funds are available.
No immediate dividend policy: If the company does not declare dividend unless the company
earn large income, it is called no immediate dividend policy. In other words, if there is not any
hurry about dividend payment and if it could be paid only when the company earns more profit is
known as no immediate dividend policy.
Regular stock dividend policy: If the company regularly pays dividends to its shareholders in
stock instead of cash, then it is called regular stock dividend policy. Regular stock dividend
policy is ale designated as bonus shares. Such policy should follow under the following
circumstances:

When the firm needs cash generated by earning to cover its modernization and expansion of

projects.
When the firm is lacking in cash despite high earning, this is particularly true and
When the firms sales is affected through credit and entire sales proceeds are tied in
receivables.

Irregular dividend policy: It is the policy in which, the firm does not pay any fixed amount of
dividend every year or dividend varied in correspondence with change in level of earning, i.e.
higher earnings means higher dividend and vice-versa. The firm with unstable earnings also
adopts this policy, when there are investable opportunities the company retains more and when
there is not any investable opportunities, the company distributes the earning as dividend or there
is not regularity of dividend payment therefore it is the most used type of dividend policy in the
Nepalese context at present.

4.1.4

Factors Affecting Dividend Policy

Legal Requirements: The legal rules provide that the dividends must be paid from earnings
either form the current years earnings or from past years earnings as reflected in the balance
sheet account retained earnings.
Liquidity position: The cash or liquidity position of the firm influences its ability to pay
dividends. A firm may have sufficient retained earnings, but if they are invested in fixed assets,
cash may not be available to make dividend payment. Thus, the company must have adequate
cash available as well as retained earning to pay dividends.
Access to the capital markets: A large, well-established firm with a record of profitability and
stability of earnings has easy access to capital markets and other forms of external financing. A
small, new or venturesome firm, however, is riskier for potential investors. Its ability to raise
equity or debt funds from capital markets is restricted, and it must retain more earnings to finance
its operations. A well-established firm is thus likely to have a higher dividend payout ratio than a
new or small firm.

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Need to repay debt: Firms may have the policy to retire its past debts by means of retained
earning. If such alternative are being adopted then such firm will retain more and pays less
dividend.
Restrictions in debt contracts: Debt contracts, particularly when long-term debt is involved,
frequently restrict a firms ability to pay cash dividends. Such restrictions, which are designed to
protect the position of the lender, usually state that (I) future dividends can be paid only out of
earnings generated after the signing of the loan agreement and (ii) that dividends cannot be paid
when net working capital is below a specified amount. Similarly, preferred stock agreements
generally state that no cash dividends can be paid on the common stock until all accrued
preferred dividends have been paid.
Growth rate of firm: A rapidly growing concern will have constant needs of long-term funds to
seize favorable opportunities for which it has to retain more and pay less dividend.
Control: Another important variable is the effect of alternative sources of financing on the
control situation of the firm. As a matter of policy, some corporations expand only to the extent
of their internal earnings. This policy is defended on the ground that raising funds by selling
additional common stock dilutes the control of the dominant group in that company. At the same
time, selling debt increases the risks of fluctuating earnings to the present owners of the
company. Reliance on internal financing in order to maintain control reduces the dividend
payout.
Stability of earnings: A firm that has relatively stable earnings is often able to predict
approximately what its earnings will be. Such a firm is therefore more likely to pay out a higher
percentage of its earnings than a firm with fluctuating earnings. The unstable firm is not certain
that in subsequent years earning will be realized, so it is likely to retain a high proportion of
current earnings. A lower dividend will be easier to maintain if earning fall off in the future.

5 Review of the International Literatures

Linter (1956) conducted a study, which is focused in the behavioral aspect of dividend policy.
He investigated dividend pattern of 28 different companies of America and found that, firm
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generally predetermines the desired payout and tries to achieve it and rarely considers other
factors. Major finding of this study are:

Firms generally prefer desired proportion of earning to be paid as dividend.

Investment opportunities are not considered for modifying the pattern of dividend behavior.
Firm generally have target payout ratios in view while determining change in dividend per
share.

Walter (1957) has proposed a model for share valuation which supports the view that the
dividend policy of the firm has impact on share valuation. His works shows clearly the
importance of the relationship between the firms internal rate of return on investments (r) and its
cost of capital (k) in determining the dividend policy that will maximize the wealth of
shareholders. Walterss model is based on the following assumptions (Chandra, 1999)

Retained earnings represent the only source of financing for the firm.
The return on the firms investment remains constant.
The cost of the capital for the firm remains constant.
The firm has an infinite life.

Modigliani and Millers (1961) model (M-M) dividend policy of the firm is irrelevant. It
doesnt affect the wealth of the shareholder. They argue that the value of the firm depends on the
firms earning, which result from its investment policy. The literature suggests that dividend
payments should have no impact on shareholders value in the absence of taxes and market
imperfections. Hence, companies should invest excess funds in the positive net present value
projects instead of paying out them to the shareholders.
Gordon (1962) developed very popular model explicitly relating the market value of the firm to
dividend policy. Gordon made a study on the dividend policy and market price of the stock and
concluded that the dividend policy of a firm influences the market value of stock. He explained
the investors preferred present dividend rather that future capital gains. He further explained that
the dividend policy has direct relation with the value of stock even if the internal rate of return is
equal to the required rate of return.
Friend and Puckett (1964) studied a relationship between dividend policy and price of stock by
running regression analysis on the data taken from 110 firms from five industries in the year 1956
to 1958. Industries taken as samples were chemicals, electric utilities, food, steels, and
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electronics. These industries were selected to permit a distinction made between the results for
growth and non growth industries and to provide a basis for comparison with the results by other
authors for earlier years. They also considered cyclical and non-cyclical industries in their study.
The study period covered a boom year for the economy when stock prices leveled off after rise
(1956) and a depressed for the economy when stock prices, however rose strongly (1958). They
used dividends, retained earnings and price earnings ratio as independent variable in their
regression model of price function and dividends as supply function. Earnings, previous years
dividend, and price earning ratio are independent variable in the dividend function. They found
that more than 80% of the variation in the stock price could be explained by three independent
variables. Dividends have predominant influence of stock price in the same three out of five
industries but they found the difference between the dividend and retained earnings coefficient
are not quite so marked as in the first set of regression. They also found that the dividend and
retained earning coefficient are closer to each other for all industries in the both the years except
for steels in 1956 and the correlations are higher again except for steels.
Foong, Zakaria, and Tan (2007) investigated the relationship between individual stock returns
with dividend yield, dividend stability and changes in dividend yield from 1992 to 2000 in the
Malaysian Trading/Services and Plantation firms. The statistical result from annually crosssectional regression show weak evidence to support the significant role of dividend yield and
dividend stability in explaining firm stock returns. Changes in dividend yield, on the other hand,
have negative and significant coefficients in explaining stock returns in Trading/Services firms
throughout 1993-1996 and the average crisis period. For Plantation firms, it is negatively
significant only in 1994 and 1997. They identified the role of dividend in explaining Malaysian
firm stock returns. They tested the relationship of firm stock returns with the so-called the
dividend related variables, comprising dividend yield, dividend stability and changes in dividend
yield. Although they do not obtained very strong results that the dividend related variables are the
main factors explaining firm stock returns, they do find that changes in dividend play some role
in explaining firm stock returns, especially of the Trading/Services firms, which are essentially
representing growth firms. If this holds true across the whole Malaysia listed firms, this suggests
that CEO and top management of growth firms should pay careful attention to the changes of
dividend yield in their firms, which has an inverse relationship with the stock returns.

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The frequent changes in firm dividend policy may be particularly useful in attempting to
differentiate high value firm from their low-value counterparts that have high dividend payout
levels. The negative sign documented implies that the lower the changes in the dividend yield,
the higher the stock returns. This suggests that the management should try to minimize changes
in the dividend yield. Smoothing dividends payment over time can push the stock price to higher
level. Another option is to maintain the level of dividend yield by adjusting the dividend payment
relative to the stock price. Furthermore, announcing changes in the level of dividend payment
provides important information to investors and must be carefully considered. This will
eventually maximize the firm value; follow by the maximization of shareholder wealth.
Bhayani, Sanjay j., (2011) Financing, Investment and dividend decisions are basic components
of corporate financial management policy. It requires an appropriate selection and combination of
capital from available sources, investment decisions are concerned with the efficient deployment
of capital funds while, dividend decisions involve the periodic determination of proportion of a
firms total distributable earnings that is payable to its ordinary shareholders. The larger the
dividend paid, the fewer funds are retained for reinvestment and the more the company will have
to rely on other sources of long term funds to finance projects.
In a study conducted by Dr. Sanjay Bhayani, Department of Business Management, Saurashtra
University, Gujarat, the author studied dividend policy of 1428 listed manufacturing companies
of India during the period of 1997-2008. Dr. Sanjay Bhayani used CMIE PROWESS data base as
the secondary sources of data. There were 4928 companies in CMIE PROWESS database. He
excluded the public sector companies because their policies are highly influenced by a large
number of social obligations and policy decisions of the government. He used the data taken
which are listed in Bombay Stock Exchange (BSE) because they are required to follow the norms
set by Securities and Exchange Board of India (SEBI) for financial reporting. After filtering the
data the sample consisted of 1428 companies. For analysis he used different variables like,
dividend per share, profit after Tax, number of outstanding per share, market price, dividend
payout ratio, and dividend Yield. He used the Linter s Model to dividend trends and hypothesis
testing.
Dividend trend indicates that the number of firms paying dividend during the study period has
decreased till 2002 and increased and again decreased in 2008. Average dividend per share on the
other hand showed a declining trend till 1999, and again rises from the year 2002 to 2008.
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Average percentage dividend payout ratio (DPR) showed a more fluctuating pattern throughout
the period of study. It showed that only a few firms have consistently paid same levels of
dividend. Of the payers, regular payers have consistently paid higher payout as well as higher
average dividend compared to that of current payers. Initiators have always paid higher levels of
dividend yield compared to that of other payers. Industry trends indicate that firms in the
electricity, mining and diversified industries have paid higher dividends where as textile
companies have paid less dividends. In summary, average dividend yield across the industries are
not as volatile as average dividend payout ratio. Throughout the period of study diversified
industries have highest dividend Yield of 0.35 followed by miscellaneous manufacturing, non
metallic mineral product and transport equipment industry. He concluded that the tradeoff theory
does not hold true in the Indian context, as Indian corporate firms on average do not appear to
have increased dividend payments despite a tilt in tax regime in favor of more dividends.
Adjaoud and Ben-Amar (2010) Despite numerous studies, dividend policy remains an
unresolved issue in corporate finance. Several theories have been proposed to explain corporate
dividend behavior to enhance the understanding of the determinants of corporate dividend
behavior. But, none of these theories could fully answer the question why firms pay dividends to
their shareholders even though agency theory seems to offer the most promising framework.
Dividend payments are expected to attenuate agency costs resulting from the separation of
ownership and management of publicly listed corporations.
The authors, who are from the Telfer School of Management of the University of Ottawa,
investigated the relationship between corporate governance quality and dividend policy in
Canada. Based on the agency theory predictions, they considered the effect of two conflicting
hypotheses about the effect of corporate governance on dividend payouts: the outcome and
substitution hypotheses. The effectiveness of firm-level governance mechanisms had been
assessed through the Globe & Mail annual corporate governance index and four sub-categories
scores (board composition, shareholding and compensation issues, shareholder rights issues and
corporate governance disclosure policy). They used the sample of 714 firm listed on the Toronto
Stock Exchange over the period 2002-2005.
The results of their study showed that firms with stronger corporate governance have higher
dividend payouts. Among the four components of the corporate governance index, they
documented board composition and shareholder rights policy positively to payout ratios. Among
15

the four governance components, they found that better shareholder rights are associated with
higher dividend payouts. The results suggest that when shareholder rights are strong,
shareholders can use their power to pressure managers to pay higher dividends instead of using
these amounts for their private benefit. They also found a positive association between firm size,
the level of free cash flows and dividend payouts. Similarly, they documented a negative
relationship between firm risk, US cross-listing and dividend payouts. This study brings fore the
ongoing debate on the relationship between governance quality and dividend policy. The results
confirmed that the effective corporate governance mechanisms attenuate agency conflicts
between managers and shareholders and limit managers opportunistic behavior in payout policy,
thus supporting the outcome model of dividend policy. These findings would be useful for
financial regulators seeking to establish effective rules to prevent managers and controlling
shareholders from expropriating minority shareholders through dividend policy. The authors
concluded by saying that their results are consistent with the outcome model of dividend policy.

6Methodology
This chapter presents the short outline of the methods applied in the process of analyzing the
capital structure.

6.1 Research Design

For the analysis of the dividend policy of Butwal Power Company Limited, analytical as well as
descriptive designs are applied to achieve the objective of the study.

6.2 Sample
Mainly the Five years financial data of the company along with the other data of the NEPSE
(Nepal Stock Exchange) are the population samples considered for the study. Our sample is
selected from companys annual reports. This study focuses on dividend policy adopted by the
company and its impact on the share value of the company. As and wherever possible the
comparative analysis has been done with the other similar company in business nature. Although
there are some BPC like companies listed in NEPSE, their way of doing business and core
revenue sources are different. Such companies are:
16

Chilime Hydropower Company Limited

National Hydropower Company Limited
Arun Valley Hydropower Development Company Limited

6.3 Methods of Data Analysis

Mainly financial methods are applied for the purpose of this study. Appropriate statistical tools
are also used.

17

7 About Butwal Power Company Limited (BPC)

7.1 Company Profile
Butwal Power Company Limited (BPC) is the pioneer and leading private sector hydropower
developer in Nepal. The core business areas are generation, distribution, and engineering &
consultancy services. Since its establishment in 1965, BPC pioneered various concepts for
developing self competency in various facts of the hydropower industry, including engineering
consultancy, construction, operation, maintenance, and manufacturing of hydroelectric
equipment.
BPC wholly owns and operates the 12 Mega Watt (MW) Jhimruk Hydropower Plant and the 5.1
MW Andhikhola Hydropower Plant and developed the 4MW Khudi Hydropower Project which
is in operation since 2007, through a special purpose company. With these plants BPC has
supplied power to the national grid and electrified around 36,000 households under its rural
electrification program. BPC Provides engineering and consultancy services through its
subsidiary Hydro Consult Private Limited (HCPL) and has repair and manufacturing facility for
hydro-mechanical components of hydropower projects under its subsidiary Nepal Hydro Electric
Limited (NHE). BPC owns shares in Himal Power Limited which owns and operates 60 MW
Khimti Hydropower Plant. BPC stands today with more than 45 years of experience in the
hydropower industry and has places itself as one of the leaders in the nation. Pursuing the
privatization process in 2003, the government of Nepal handed over majority ownership and
management control to private investor on public private partnership model.
BPC is registered with the Securities Board of Nepal (SEBON) and listed in Nepal Stock
Exchange Limited. Starting off with electrification plan of a small city in the southern hills of
Nepal, BPC is the only enterprise which can look back to a four decade long history of sustained
growth in the country and a track record of pioneering multi faceted capacity building initiatives
in hydropower development.

18

Vision

To be a leading enterprise in power sector with excellence in providing innovative and quality
products and services to meet the growing demand for efficient and clean energy
Mission

To be competitive hydropower developer and an electric utility

To be secure sustainable performance of investment
To be committed to protect the environment
To practice corporate social responsibility by serving the communities
To provide safe, healthy and fulfilling the work environment for employees
To maximize value for all stakeholders

7.2 Companys Business

Companys current businesses are categorized as below.

Generation Business
Distribution Business
Business Development
Other Business

Generation Business: Generation business is run by the Generation Division of the company.
Generation Division is solely responsible for smooth operation and maintenance of BPCs power
plants, the 5.1 MW Andhikhola Hydroelectic Centre at Galyang, Syangja and 12 MW Jhimruk
Hydroelectric Centre at Darimchaur, Pyuthan. Energy generation and sales are the core business
of the company as it generated a major portion of the revenue.BPC sales the majority of
generated hydro electricity to NEA which connect to the national grid transmission lines.
Distribution Business: Distribution business is run by the Distribution Division of the company.
Distribution in BPC started through Andhkhola Hydroelectri and Rural Electrification Project
(AHREP) in 1990 AD. BPC distributes electricity in 4 districts of western and mid western
region of Nepal . The districts are Syangja , Palpa, Pyuthan and Arghakhanchi. Presently there
are about 40,000 local consumers spread across 64 VDCs/Municipalities. These customers are
provided services through two distribution centre and 2 branch offices. The two distribution

19

centres are Syangja/Palpa Distribution Centre located at Galyang and Pyuthan/Arghakhanchi

Distribution centre located at Nayagaun, Pyuthan.
Business Development: Besides the core business BPC explores and develops the new
hydropower projects. Presently it has following projects in development phase.

Andhikhol Hydropower Project Upgrading (9.4 MW)

Kabeli -A Hydroelectric Project (38 MW)
Nyadi Hydropower Project (30 MW)
Lower Manang Marsyangdi Hydropower Project (210 MW)
Marsyangdi III Hydropower Project (42 MW)

Other Business: Through its subsidiary companies BPC is engaged in development, operation
and maintenance of hydropower plants, engineering consultancy of hydropower and
infrastructure projects, manufacturing and repair of hydro- mechanical equipment for power
plants.

7.3

Capital Structure
(as per unaudited provisional Balance Sheet of 2068/69)

SHARE HOLDERS' FUND:

Share Capital

1,015,269,400

Reserve & Surplus

1,581,408,611

Total Shareholders' Fund

2,596,678,011

Grant Aid in Reserve

Long Term loan

192,627
247,087,146

TOTAL

2,843,957,784

7.4 Shareholding Structure

1
2
3

Name of shareholders
Shangri-la Energy Limited
General Public/individuals
Government of Nepal

%
68.95
12.00
9.09

20

4
5
6
7

Interkraft Nepal AS, Norway

United Mission to Nepal
Nepal Electricity Authority
Nepal Industrial Development Corporation
Total

7.5

6.05
2.79
1.06
0.06
100

Investment in subsidiaries and associate companies

(as per unaudited provisional Balance Sheet of 2068/69)

Name of Subsidiary/Associate company

Amount In NRS.

Subsidiaries:
Nepal Hydro & Electric Ltd.

71,580,000

Khudi Hydropower Limited

50,400,000

Khudi Hydropower Limited (Preference Share)

57,600,000

BPC Services Limited

10,000,000

Nyadi Hydropower Limited

223,606,000

Keton Hydropower Co. Ltd.

14,400,000

Hydroconsult Pvt. Ltd.

8,000,000

Kabeli Energy Limited

8,100,000

Sub-total

443,686,000

Associates:
Himal Power Limited

434,931,461

Sulabh Co-operative Society Limited

639,500.00

Hydro Lab Pvt. Ltd.

1,000,000

Sub-total

436,570,961

Grand Total

880,256,961

7.6

Five Years Financial Highlights

Balance Sheet Summary
(Amount in thousand NPR)
Particulars

2063/64

2064/65

2065/66

2066/67

2067/68

2006/07

2007/08

2008/09

2009/10

2010/11

743,893

725,742

765,339

781,666

1,521,536

60,408
33,629
3,014
1,989
340,697

60,408
33,502
2,784
1,837
314,043

64,305
32,976
2,554
1,685
287,502
20,734

66,561
30,508
2,323
1,533
281,217
19,893
33,048

66,561
28,267
2,093
1,381
258,644
19,006
31,708
18,680

ASSETS & PROPERTY:

Fixed Assets
Land
Office Building & Quarters
Access Road
Suspension Bridge
Power Plant & Machinery
Switching Station
Sub Station
33 KV Transmission Line
Upgrading

21

1 KV Conversion into 11 KV
Transmission & Distribution
Line
Office Equipments
Furniture
Vehicles
Revalued Asset
Work in Progress
Investment in Shares
Current Assets, Loan &
Advance
Stock
Debtors & Receivable
Cash & Bank Balance
Advance & Deposit
Deferred
Revenue
Expenditure
Total
CAPITAL & LIABILITIES:
Equity
Reserve & Surplus
General Reserve
Revaluation Reserve
Retained Earnings
Grant Aid in Reserve
Long Term Loan
Current Liabilities
Short Term Loan
Creditors & Payables
Advance & Deposit
Provisions
Provision for Corporate Tax
Corporate Tax for 2060/61
(under Appeal)
Provision
of
Loss
in
Investment
Provision for Expenses
Total

5,814
326,480

276,756

267,466

294,963

305,741

22,700
1,461
3,239

25,695
1,645
18,362

28,870
2,078
29,682

20,866
1,373
18,603

24,369
465,705
647,416

37,191
477,858
746,136

43,155
706,134
743,837

95,404
807,211
651,519

19,869
1,378
21,918
719,737
205,488
932,853
600,396

58,896
58,918
457,035
72,567
888

74,647
88,407
412,635
170,447
4,765

92,723
171,359
291,687
188,068
5,735

104,543
93,690
234,888
28,398
5,644

83,413
184,140
44,902
287,936
4,895

1,882,271

1,991,692

2,264,200

2,234,144

3,265,163

839,058
455,805
148,700

839,058
556,762
148,700

839,058
707,210
148,700

922,968
706,834
148,700

222,805
84,300

306,397
101,665

568,510
89,947
447,705
30,858
18,898
9,619

570,323
183,956
356,934
29,433
25,549
9,401

429,502
129,008
26,729
624,543
154,294
434,050
36,199
66,660
12,247
16,774

385,120
173,014
57,970
566,569
205,495
301,517
59,557
87,103
25,207
16,774

1,015,269
1,695,673
148,700
719,737
621,051
206,185
118,111
328,979
162,932
149,189
16,858
107,131
38,291
16,774

9,279

16,148

37,639

45,122

38,762

1,882,271

1,991,692

2,264,200

2,341,444

13,304
3,265,163

Profit & Loss Account Summary

(Amount in thousand NPR)

Particulars

2063/64

2064/65

2065/66

2066/67

2067/68

2006/07

2007/08

2008/09

2009/10

2010/11

INCOME
Operating Income
Electricity Sale to NEA
Electricity Sale to Consumers
Electricity Services
Management and Technical Support
Consultancy Services
Total Operating Income

334,166

372,521

375,103

387,896

408,575

45,603

49,166

55,697

65,535

75,212

3,634

6,151

8,040

9,137

9,228

3,740

17,241

80,877

9,535

18,894

28,108

392,938

446,732

470,688

479,809

573,892

Income from Other Sources

22

15,365

16,495

11,272

6,408

15,825

(25,740)

18,217

30,809

(3,651)

(4,283)

97,982

156,894

104,843

137,803

164,265

143

608

(602)

2,295

6,964

5,276

5,866

7,547

9,408

2,794

3,867

4,317

2,077

1,461

1,983

2,897

1,699

1,792

98,826

202,875

160,612

151,281

189,302

491,764

649,607

631,300

631,090

763,194

Generation Expenses

74,565

82,514

88,491

137,842

144,495

Distribution Expenses
Management and Technical Support
Expenses

33,303

48,428

48,700

55,762

59,509

12,072

19,556

1,045

8,014

8,774

16,743

18,957

40,068

59,920

70,377

83,253

73,503

Provision of Loss in Investment

9,479

6,869

21,491

7,483

(6,360)

Interest Expense

5,266

7,246

7,913

18,104

25,240

51,924

55,103

61,873

60,632

62,199

Interest Income
Foreign Currency Exchange Gain
(Loss)
Dividend Income
Gain (Loss) on Disposal of Assets &
Stock Materials
Depreciation Being Revenue Portion
of Grant Aid
Grant Support for Technology
Transfer
Other
Total Non- Operating Income
Total Income
EXPENDITURE

Project Development Expenses

Consultancy Services
Administrative Expenses

Depreciation
Staff Bonus
Total Expenditure

5,926

9,504

9,659

5,457

9,777

229,305

286,327

327,461

381,650

395,933

Net Profit Before Tax

262,459

363,280

303,839

249,440

367,261

9,619

9,401

12,247

25,207

38,291

Net Profit After Tax

252,840

353,879

291,592

224,233

328,970

Retained Earnings b/f

222,131

222,805

306,397

429,502

385,120

(531)

(18,570)

(676)

(115)

(742)

(41,871)

(83,906)

(92,297)

(209,764)

(251,717)

(167,811)

(184,594)

222,805

306,397

429,502

385,120

(621,051)

Income Tax Provision

Prior Years Adjustment

Dividend of 2057/58 Paid
10% Stock Dividend
Proposed Dividend
Balance transferred to B/S

23

Presentation and Analysis of Data

This is an analytical chapter, where an attempt has been made to analyze and evaluate the data
collected. To analyze the data collected various presentation and interpretation is done in order to
fulfill the objective of this study.

8.1 Net income summary

Fiscal year

Net Profit Amount in NRs. (in 000)

252,840
353,879
291,592
224,233
328,970

2063/64 (2006/20070
2064/65 (2007/2008)
2065/66 (2008/2009)
2066/67 (2009/2010)
2067/68 (2010/2011)

8.2

No of outstanding shares
Fiscal year

Outstanding shares number

8,390,577
8,390,577
8,390,577
9,229,675
10,152,694

2063/64 (2006/20070
2064/65 (2007/2008)
2065/66 (2008/2009)
2066/67 (2009/2010)
2067/68 (2010/2011)

8.3 Stock prices as at Balance Sheet Date

Fiscal year
2063/64 (2006/07)
2064/65 (2007/08)
2065/66 (2008/09)
2066/67 (2009/10)
2067/68 (2010/11)

Stock price at Balance Sheet Date

Rs . 1,000
Rs. 1,559
Rs. 1,270
Rs. 1,090
Rs. 739

8.4 Stock prices before and after AGM

Notice of AGM published
date
24 Marg 2064
27 Marg 2065
2 Poush 2066

Stock Price Just before AGM Notice

published
Rs. 1,720
Rs. 1,112
Rs. 975

24

Average Stock Price after one

month of AGM
Rs. 1,489
Rs. 946
Rs. 910

29 Marg 2067
11 Poush 2068

Rs. 800
Rs. 460

Rs.
Rs.

705
459

8.5 Calculations & Analysis

Calculation of Earnings Per Share (EPS)

EPS

NEAT
NOS

Where,

NEAT = Net Earnings After Tax

NOS

= No of Outstanding Shares
Fiscal year

Net Earnings After

Tax (NEAT)

2063/64 (2006/2007)
2064/65 (2007/2008)
2065/66 (2008/2009)
2066/67 (2009/2010)
2067/68 (2010/2011)

252,840,000
353,879,000
291,592,000
224,233,000
328,970,000

Outstanding shares
number
(NOS)
8,390,577
8,390,577
8,390,577
9,229,675
10,152,694

Earnings Per Share (EPS)

Rs.
30.13
42.18
34.75
24.29
32.40

Dividend Payout
Fiscal year
2063/64 (2006/20070
2064/65 (2007/2008)
2065/66 (2008/2009)

2066/67 (2009/2010)

2067/68 (2010/2011)

Dividend
%
25% Cash
30% Cash
30% (20% Cash Dividend
&
10% Stock Dividend)
30% (20%Cash Dividend
&
10% Stock Dividend)
25% Cash

Dividend Payout Ratio (DPR)

DPR

Dividend
X 100
NI

Where,
25

In Amount Rs. (000)

209,764
251,717
167,811
&
83,906
184,593
&
92,297
253,817

26

NI

= Net Income after Tax

Fiscal Year
2063/64 (2006/20070
2064/65 (2007/2008)
2065/66 (2008/2009)
2066/67 (2009/2010)
2067/68 (2010/2011)

Net Income after tax

252,840
353,879
291,592
224,233
328,970

Dividend
209,764
251,717
251,717
276,890
253,817

DPR %
82.96%
71.13%
86.33%
123.48%
77.16%

Outstanding shares
number
(NOS)
8,390,577
8,390,577
8,390,577
9,229,675
10,152,694

Dividend Per Share (DPS)

Rs.

Dividend Per Share (DPS)

DPS

TDA
NOS

Where,
TDA

= Total Dividend Amount in a given year

NOS

= No. of Outstanding Shares

Fiscal year

Total Dividend
Amount
(TDA)
209,764,000
251,717,000
251,717,000
276,890,000
253,817,000

2063/64 (2006/2007)
2064/65 (2007/2008)
2065/66 (2008/2009)
2066/67 (2009/2010)
2067/68 (2010/2011)

25
30
30
30
25

Computation of cost of Equity

Cost of Equity as CAPM

K e Rf ( Rp m Rf )
Where,
Month
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
Total
Annual Average of 7 months
Rf

Rate
0
4.46
4.43
3.27
2.68
3.03
0
2.41
2.65
27
22.93
3.28
3.28

Ke

= Cost of Equity

Rf

=Risk Free rate

RPm

= Risk premium rate in the market

= Beta of the Company

Computation of Rf (weighted Average Treasury Bill Rate364 days- as per report of Nepal Rastra
Banks quaterley Economic Bulletin Mid April 2012 Annex - B)

RPm

= 12.5% (as per daily newspaper Karobar )

= 0.7028 (As per Calculation attached Annex- A)

K e 3.28% (12.5% 3.28%)0.7029

=

9.76%

The cost of equity for the company is 9.76% the expected return will be not less than cost of Equity.
So the Expected rate of return (rs) taken as 9.76%
To calculate the value of common stock we will have
^

P0

D1
rs g

Where,
^

P0
= Current Price of common stock
D1

Dividend paid in year one.

rs

Expected rate of return

= Growth of the company

As per the data presented in the Dividend payout table there we see that in the first year of the study
period 25% dividend paid and in the second year 30% dividend paid. As such investor can predict that
there is a chance of growth. On other hand also there is seen from the dividend pay out ratio table that
more than 70% of the earning is being paid each year. From this we can calculate the growth by
applying the growth rate formula
G =

br

Where,
b

= retention ratio (1- Dividend Payout Ratio)

28

= Expected rate of return

So if we assume 70% as Dividend payout ratio then

g

= (1- .70) 0.0976

=0.029
= 2.9% or 3%

Taking these values the current market price of the common stock and dividend paid in the year
2068 Rs.25 (i.e.25%) as D1
^

P0

D1
rs g

Rs.25
0.0976 0.03

=Rs. 369.82

BPCs Current market price of common stock as on the date after the one month period of AGM
held where the 25% dividend distribution declared is Rs.459. It means we can conclude that the
market price of BPC Common Stock is overvalued.

Summary and Conclusions

9.1 Summary of Findings
BPC is distributing the dividend from the earnings each year. But there is no any prescribed
policy of distributing the dividend is adopted so far. This company was privatized in 2003 by
selling the 75% ownership of Government of Nepal to the private sector.
It has the history of paying dividend consistently since fiscal year 2052/53 except in the year
2058/59 and 2059/60 no dividend was paid due to the company was in Loss in these two years.
Shareholders make investment in equity capital with the expectation of making earning in the
form of dividend or capital gains. High payout satisfies the dividend need whereas increase in

29

market price of stock increases capital gain. Therefore, firm should make a proper balance
between dividends and retained earnings.
Dividend distribution is the very important factor to any organization for effective goal
achievement to satisfy the shareholders. Dividends are decided upon and declared by board of
directors. A firms profits after-tax can either be used for dividends payment or retained in the
firm to increase shareholders' fund. This may involve comparing the cost of paying dividend with
the cost of retaining earnings.
Actually, paying dividend to shareholders is an effective way to attract new investors to invest in
shares. Due to decision of earnings of a company between dividends payout and retention of
earnings of a company between dividend payout and retention of earnings, its effect on market
value of shares is a crucial question. So, a wise policy should be maintained between
shareholders interest and corporate. The funds sometimes could not be used in case of lack of
investment opportunities. In such a situation distribution of dividend to shareholders is taken as
the best because shareholders may have investment opportunities to invest elsewhere.
In Nepal there is more practice of cash dividend and stock dividend. The payment of cash
dividend by the financial institutions especially by banks is seen well than other sectors.BPC also
has paid 10% stock dividend in two consecutive years making the paid up capital of Rs.
10.15billion.
During the course of the study we could not find any clue that the dividend policy of the
company does influence or give impact on the share price of the company. The Nepalese stock
market running on the speculation of investors.
Though there are some other companies are exists in the hydropower business their way of doing
business is different. In the financial performance comparison can be done with them but the
nature of incurring operating cost is different because BPC also involve in the energy sale in to
the local consumers which do not contribute in the net income of the company substantially
rather it has to bare the loss in this business.

30

Thus, the study attempts to determine the impact of cash dividend on stock price. For this whole
purpose different descriptive, financial and statistical analysis was done using various
methodologies.

9.2 Conclusions
This study also concludes that there is no significant difference between the average MPS before
and after the cash dividend payment of Butwa Power Company. The market price of the company
is always over priced. The root cause of this situation can not be found. The only we can predict
that the price of the share is determined by the speculation of the investors. But one principle or
the dividend theory is seem to applied in the case of Butwal Power Company also is that after
the declaration of the dividend from the AGM it was found that the share price falls down.

10

Recommendations
On the basis of findings the following recommendation is made for the further applications of
dividend policy regarding its impact on the stock prices:
1. Butwal Power Company has to formulate a steady and prescribed policy on distributing the
earning to the investors. Due to the lack of this policy investors do not aware about future
growth.
2. Shareholders should be given an option to choose between stock dividend and cash dividend
instead of declaring stock or cash dividend arbitrary. For this, dividend declaration should be
proposed to the AGM of shareholders for approval.
3. The legal rules and regulation must be in favor of investors to exercise the dividend practice
and to protect the shareholders right.
4. The investors should be careful in investing in the stock of development banks, insurance
companies, hotel and other sector on the basis of cash dividend.
5. The company should provide the information regarding the activities and performance, so
that investors can analyze the situation and invest their money in the best company.
6. Having seen the history of dividend paying companies, it is seen that the net profit after tax is
the main base for distributing the dividend. Thus, it is suggested that investor who want to

31

purchase the equity share and immediate return should invest on the share of high profit
earning companies.
7. The investor should also think of investing in the hydropower sector for the investment
portfolio diversification. As Nepal has a huge potentiality in generation of the hydropower,
there is a good future for the better performance.
8. As per the study it has been seen that though there is different in the market price before and
after AGM this is not seen as significant. Therefore it suggested to investors not to invest in
the AGM period only because of dividend.

32

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12. Uddin, Md. H. (2003). Effect of Dividend Announcement on Shareholders Value: Evidence from
Dhaka Stock Exchange. Van Horne, J. C. (2005). Financial Management and Policy. New Delhi:
Person Education, Inc.
13. Van Horne, J. C. (2005). Financial Management and Policy, Person Education, Inc., New Delhi
14. Weston, F. J. & Copeland, T. E. (2001). Managerial Finance. New York: The Dryden Press.
15. Weston, F. J. & Copeland, T. E., 2001: Managerial Finance, New York: The Dryden Press.
16. Wolff, H. K. & Pant, P. R. (2005). Social Science Research and Thesis Writing Kathmandu: Buddha
Academic Enterprises Pvt. Ltd.

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ANNEXES

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Please Refer attached PDF File for workings for BPC BETA..\BPC beta working.pdf

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