Management

ISSN: 2091-0460 Dynamics 145

Vol. 23, No. 2: 145-160, 2020
Shanker Dev Campus
Doi: https://doi.org10.3126/md.v23i2.35818

Factors Influencing Investment Decisions

of Nepalese Investors
Purna Man Shrestha *
Abstract
The study focuses on the factors influencing investment decisions of Nepalese investors in the stock
market, with a sample size of 110 respondents of Surkhet Valley. The data are collected using structured
questionnaire containing yes/no response questions, multiple choice questions, ranking questions, and
Likert scale questions. The survey was conducted in June, 2018. The factors influencing investing
decision are grouped into three main variables i. e. company related variable (CRV), risk and return
related variable (RRV), and market related variable (MRV). In company related variable factors such as
management team, financial performance, size, EPS, DPS are included, in risk return related variable
expected return, past return, risk of the company, liquid securities etc. are included, and in market
related variable factors such as market information, market price per share, dividend growths etc. are
included.

This study concluded that majority of investor prefer to by stock from primary market,
investor analyze the company before making investment decision, investor monitor their
portfolio occasionally, and most of the investor use own saving for making investment in
stock.

Finally, this study concluded that investment decision of Nepalese investor is more influenced
by company related variable (CRV) than market related variable (MRV) and risk and return
related variable (RRV). Positive and significant coefficient of company related variable (CRV)
is observed in all regression models. It can, therefore, be concluded that the Nepalese investor
makes investment decision observing the company related variable of Nepalese companies.

Keywords: Investment decision, company related variable (CRV), market related variable (MRV), risk
and return related variable (RRV).

Introduction
Investment decisions are considered one of the major aspects of financial decision.
Investors commonly take investment decision by fundamental analysis, technical
analysis and judgment. Investment decisions are often supported by decision tools.

* Associate Professor, PhD Scholar, Faculty of Management Mid-Western University, Surkhet, Nepal
E-mail: [email protected]
146 Management Dynamics, Vol.23, No.2, 2020 ISSN: 2091-0460

A large body of empirical research (Mojgan and Ali 2011, Azam and Kumar, 2011,
Geetha and Ramesh, 2012 etc.) indicated that individual investors makes investment
decision analyzing various factor related to investment. Mojgan and Ali (2011)
studied investor decision making in the Tehran stock market, and found that two
factors, i.e. earnings per share and cash dividends influenced investors’ decision
to buy stocks. Similarly, Azam and Kumar (2011) examined the factors influencing
Pakistan investors’ behaviour on the Karachi stock exchange and found that the
earnings per share, foreign direct investment and growth rate of gross domestic
product have a significant impact on stock prices. Merikas, Merikas, Vozikis, and
Prasad (2008), Masomi and Ghayekloo (2011), and Fares and Khamis (2011) also
investigated factors influencing investor decisions in different stock markets. Shaikh
and Kalkundrikar (2011) studied the demographic effect on investment decisions.
These studies concluded that investor’s age, education, and accessibility to the internet
had a significant impact on stock trading. Similarly, some of these studies concluded
that certain behavioural factors also makes influence on investment decision of
individual investors. Chandra (2008) found that investors are not always rational
unlike the theories of standard finance. They are subject to several cognitive and
emotional errors; they are suffering from several biases while taking the investment
decision. Due to different investors’ biases their perception change about risk taking.
Results show that investors who are actually risk averse in their characteristics show
the risk seeking behavior by holding the losing investments.

Very few studies related to investors’ behavior on stock market investment decision
have been conducted on Nepalese stock market. Adhikari (2010) conducted a study
to analyze the investment behavior of Nepalese investors. Adhikari found that the
investors are mostly overconfident regard to their self-reported level of investment-
related knowledge, experience and their ability to pick stock. They exhibited wishful
thinking that the shares they hold will appreciate in value. There was a notable
difference in the level of confidence in various aspects of investing according to the
age and gender of the respondents. The study of Adhikari also found that varying
availability of information and the level of understanding of the respondents have an
influence in their investment decision making process. Interviews with brokers have
brought out a conclusion that most of the Nepalese investors do not have necessary
skills to analyze financial information related to companies they are considering
investing in and this affects the quality of their investment decision making. Similarly,
Kadariya (2012) analyzed the factors that impact the investor’s investment decision.
These factors include capital structure, political and media coverage, luck and
financial education and trend analyses in the Nepalese capital market. Findings of
the study show that majority of the investors are youngsters and they take decision
considering the media coverage and friend’s recommendations as good source of
ISSN: 2091-0460 Factors Influencing Investment Decisions of Nepalese Investors 147

information. Dividend, earning, equity contribution and government control are

considered the most important factors while taking the decision. Investors when
bears the loss blames to the market and when earns profit take whole credit their
own abilities.

Furthermore, Thapa (2013) conducted a study on investment behavior of individual

investors in Nepalese stock market. The study of Thapa found that investors have
no preference in the types of market for investment but they are motivated for short
term profit. The result of Thapa indicated that increase in the size of investment leads
to decrease in the confidence level of investors, and size of investment has positive
impact on the level of involvement and negative effect on investors’ optimism.
In risk taking attitude of investors, Thapa found that professional experience is
positively related while size of investment is negatively related. The study of Thapa
also found that increase in the size of investment leads to decrease in the confidence
level of investors. Size of investment has significantly positive impact on the level
of involvement and negative effect on investors’ optimism; higher professional
experience of investors tends to increase risk taking capacity while investors with
large investment have lower tendency to take risk. Similarly, investors having higher
level of confidence, involvement, optimism and risk taking attitude tend to trade
more frequently in the stock market. Thus, investment behavior of investors is highly
influenced by their personal characteristics and psychology.

On the other hand, Karki and Adhikari (2014) conducted a study on investment motive
of individual investor in the stock of market of Nepal. Karki and Adhikari found
that the most of the investors had the investment motive of speculation and least of
the investors had the investment motive of gambling. The study further concluded
that there was a positive relationship between information and analysis, investment
horizon, age level, and experience in stock market with investment motive. Further
this study also revealed a moderate association between academic qualification and
investment motive, and information and analysis had a positive relationship with
the investment score. Similarly, the result of the study further concluded that rumors
and tips are playing vital role in Nepalese stock markets. Finally, Bajracharya (2017)
conducted another study related to investor’s attitude toward mutual fund. The
study of Bajracharya found that there is no association between investors’ attitude
towards mutual fund on the basis of demographic and socio economic. Investors
provide their highest preference on brokers/ Agents as a source of information
and other hand, investors give their least preference on Magazines. It was found
that, the investors attitude is not independent towards mutual fund on the basis of
demographic and socio economic variable (age, gender, monthly income, investment
148 Management Dynamics, Vol.23, No.2, 2020 ISSN: 2091-0460

level, educational qualification). Also, among selected sources, investors provide

their highest preference to Brokers/Agents to make investment.

Thus, this study aims to analyze the factors influencing investors’ investment decision
on Nepalese stock market. This study evaluates the effect of investors’ behavior for
making investment decision in Nepalese stock market. This study examines the effect
of company related variable (CRV), risk and returns variables (RRV) and market
related variables (MRV) on the investment decision. In company related variables
factors such as management team of the company, financial performance of the
company, size of the company, EPS, DPS are included. Similarly, in risk return related
variable expected return, past return, risk of the company, liquid securities etc. are
included. Finally, in market related variable factors such as market information,
market price per share, dividend growths etc. are included. There is only one stock
exchange in Nepal i.e. Nepal stock exchange. Very few professional investors are
involved in Nepalese stock market. Therefore, this study deals with the following
issues:

Why investors invest in stock market?

• What are the determinants of investment decisions in the Nepalese stock market?
• How investors make investment decision in Nepalese stock market?
• What is the effect of risk and returns of the stock on investment decision?
• What market related variables consider by investors for making investment decision?

Objective of the Study

The main objective of this study is to analyze the factors influencing investment decision in
Nepalese stock market. The others specific objectives are as follows:

• To analyze the impact of company related variables on investment decision.

• To analyze the impact of risk and returns related variables on investment
decision.
• To analyze the impact of market related variables on investment decision
• To identify the determinants of investment decisions in the Nepalese stock
market.
• To examine the extent to which the identified factors affect investments decision
in the Nepalese stock market

Research Methodology
The fundamental goal of this study is to analyze the factors influencing investment decision
in Nepalese stock market. Thus, this study follows descriptive and analytical research design.
This study follows the descriptive research design to describe the various issues raised and it
ISSN: 2091-0460 Factors Influencing Investment Decisions of Nepalese Investors 149

follows the analytical research design to analyze the impact of company related variable, risk
and return related variable and market related variables on investment decision on Nepalese
stock market.

This study is mainly based on the primary data. In order to collect the necessary data for
this study structured questionnaire has been used. Yes/no response questions, multiple
choice questions, ranking questions, and questions based on Likert type scale questions were
included in the questionnaire. In multiple choice options, respondents were asked to put tick
mark in an appropriate option and in ranking options, they were asked to rank the given
options by assigning a rank ‘1’ to the most important one and so on. For Likert scale options,
the respondents were asked to tick mark in five points Likert scale items, where ‘5’ being
‘strongly agree’ and ‘1’ being ‘strongly disagree’.

One hundred fifty questionnaires were distributed to the respondents of Birendranagar,

Surkhet on January 2019 to the respondents from different sector like staffs of commercial
banks, entrepreneurs, government officers, graduate level management student and the
person who has invested stock market. Out of them one hundred ten respondent has returned
complete and usable questionnaires. Thus the response rate is 73.34% which is good for survey.
Remaining forty questionnaires could not include in analysis process since some of them
were not filled up completely, some of them were chosen same alternatives from beginning to
ending of questions that created question in reliability and validity of the information.

Data Analysis and Findings

Profile of the Respondents:
This section presents demographic components i.e. age gender, education background,
occupation of the respondent.

Table 1 Profile of Respondents Based on Personal Characteristics

Table 1 provides information on the number and percentage of respondents across different
personal character such as gender, age group, occupation, family income, education, and
experience period.
150 Management Dynamics, Vol.23, No.2, 2020 ISSN: 2091-0460

Basis for Classification Frequency Percent

Male 81 73.6
Gender Female 29 26.4
Total 110 100.0
16 to 25 22 20.0
26 to 35 48 43.6
36 to 45 26 23.6
Age group
46 to 55 13 11.8
56 above 1 .9
Total 110 100.0
Student 2 1.8
Employed 90 81.8
Occupation Entrepreneur 13 11.8
Unemployed 5 4.5
Total 110 100.0
less than 15000 4 3.6
15000 to 25000 29 26.4
26000 to 35000 25 22.7
Family Income
36000 to 45000 18 16.4
46000 above 34 30.9
Total 110 100.0
Intermediate and
24 21.8
below
Under Graduate 10 9.1
Education
Graduate 39 35.5
Post Graduate 37 33.6
Total 110 100.0
less than 2 years 43 39.1
2 -5 years 34 30.9
Experience
5-10 years 21 19.1
period
more than 10 12 10.9
Total 110 100.0
Sources: Field survey, 2018

The distribution of gender clearly shows that male are more actively involved in
investment in shares. Total number of male respondents are 81 (73.6 percent) whereas
the total number of female respondents are only 29 (26.4 percent).

For the purpose of this survey the ages of the respondents are divided into five
groups,16 - 25 years, 26-35 years, 36-45 years, 46-55 years and above 56 years. Among
the 110 respondents, 20 percent are of age group 16-25 years, 43.6 percent are of age
group 26-35 years, 23.6 percent of age group 36-45, 11.8 percent of respondent are of
ISSN: 2091-0460 Factors Influencing Investment Decisions of Nepalese Investors 151

the age group 46-55 and 0.9 percent of respondents are of age group 56 and above.
The distribution suggests that the people of age group 26-35 years are more involved
in stock market who almost occupie almost 43.6 percent of the total respondent of
this survey.

Similarly, Out of the total 110 respondents, (1.8 percent) respondents are students. 81
(8.3 percent) respondents are from the service sector, 13 (11.8 percent) respondents
are entrepreneurs, and 5 (4.5 percent) are unemployment.

Further, respondents are also classified in terms of their family income. 3.6 percent
respondents have the family monthly income of less than 15000 per month. 26.4
percent respondents have the family income per month between 15000-25,000, 22.7
percent respondents have the monthly family income between 26000-35000, 16.4
percent respondents have the monthly family income between 36000-45000 and 30.9
percent have the family monthly income above 46,000.

Respondents are also classified in terms of their education. 33.6 percent of respondents
have completed their Post-Graduate level of education. Similarly, 35.5 percent
of respondents have completed their Graduate level of education. 21.8 percent of
respondents come under intermediate and below and the numbers of Under Graduate
investors are minimal with only 9.1 percent.

Finally, respondent are also classified according to their experience. The result
indicates that 39.1 percent investors have experience less than 2 years. 30.9 percent
respondents have experience of 2 to 5 years. Similarly, 19.1 and 10.9 percent
respondents have experience of 5 to 10 years and more than 10 years respectively.

Perception of the investor on the various aspects of stock market

To analyze perception of the respondent regarding the various aspects of stock market
respondent were asked to present their response on preferred market for investment,
preferred company for investment, analysis of company before making investment,
monitoring of portfolio, investment horizon, source of investment money etc. Their
responses regarding these issues are presented in Table 2.
152 Management Dynamics, Vol.23, No.2, 2020 ISSN: 2091-0460

Table 2: Perception of the investor on the various aspects of stock market

Items Frequency Percent
Primary market 82 74.5
Preferred Market to Secondary market 2 1.8
buy shares Both 26 23.6
Total 110 100.0
Yes 90 81.8
Analysis of No 17 15.5
companies Don’t know 3 2.7
Total 110 100.0
Daily 13 11.8
Monitoring
Monthly 38 34.5
investment
Occasionally 59 53.6
Portfolio
Total 110 100.0
Long-term 62 56.4
Medium-term 31 28.2
Type of investor
Short-term 17 15.5
Total 110 100.0
Saving 106 96.4
Source of Inherited 2 1.8
investment money Borrowed money 2 1.8
Total 110 100.0

Sources: Field survey, 2018

It can be observed from table 2 that investors are more interested to invest in primary market
than secondary market. About 74.5 percent of total investors like to invest in primary market
whereas 23.6 percent of investors like to invest in both markets. It also shows that only 1.8
percent of investors like to invest in secondary.

Similarly, the result presented in table 2 indicates that the majority of the respondent i. e. 81.8
percent of the respondent analyzes the company and 15.5 percent respondents do not analyze
the company for making investment whereas 2.7 percent respondent opined that they don’t
know about this issue.

As regards how often respondents monitor their investment portfolio, another question was
asked to the respondent. The majority of the respondent (53.6 percent) opined that they
monitor their portfolio occasionally whereas 34.5 percent respondents opined that they
monitoring the investment monthly, and finally, 11.8 percent respondents are more interests
to monitor their investment portfolio daily.

The investment horizon can be used as the basis to divide the investors into long term
investors, medium term and short term investors. The respondents were asked to ascertain
ISSN: 2091-0460 Factors Influencing Investment Decisions of Nepalese Investors 153

themselves in any one of the above three categories. 28.2 percent of the investor ranked them
as the medium term investors. 15.5 percent consider themselves as the short term investors
and 56.4 percent of the investors consider themselves as the long term investors. It shows that
long term investors who generally hold the shares for more than 5 years are higher in Surkhet
than compared to medium term and short term investors.

Finally, investors are further divided into two types on the basis of the source of the invested
money; active investor and passive investor. If the investor had used inherited money to
invest in the market, then the investor is passive investor and if not, then active investor. The
survey result shows that in Nepalese stock market more than 96.4 percent investors use their
own earning to invest in stock market whereas the remaining uses the earning from other
sources like inherited money (1.8 percent) or borrowed money (1.8 percent).

Investment Strategy Pattern

An investment strategy is a set of rules, behaviors or procedures, designed to guide an
investor’s selection of an investment portfolio. Thus, it can be derived only after analyzing the
factors responsible to guide the investor’s behavior while selecting the particular investment
alternative. The major factors responsible are source for information, information search,
each of these are described below.

Source of information and reliability of the source of the information are two most important
components for any investors. This study had tried to find out the source of information
and usefulness of the major source of information for the primary market and secondary
market investors in Nepal. In this regard, the respondents are asked to rank their source of
information to invest in stock market as per their importance most important to 1 and so on.

The result regarding the source of information of Nepalese stock market investors is presented
in the table 3.

Table 3 Rank wise source of information for Nepalese stock investors

Frequency Weighted Weighted
Sources of information Total Rank
1 2 3 4 5 Value Mean
Family and friends 38 20 26 18 8 110 268 2.43 2
Newspaper 16 38 34 18 4 110 382 3.47 4
Companies annual report
22 21 18 41 8 110 322 2.93 3
and prospectus
Brokerage house 0 5 3 19 83 110 510 4.63 5
Electronic media 33 27 19 14 7 110 235 2.13 1
Source: Author’s calculation

It is evident from Table 3 that the most important source of information is “Electronic media”.
It got the weighted value of 235 with the lowest weighted mean value of 2.13 and ranked as
154 Management Dynamics, Vol.23, No.2, 2020 ISSN: 2091-0460

number one. The respondents ranked “Family and friends”, “Companies annual report and
prospectus”, “Newspaper”, and “Brokerage house” as the second, the third, the fourth, and
the fifth important sources of information respectively.

Similarly, to identify the preferred sectors of investment for Nepalese stock market investors,
the respondents were asked to choose their preferred sector of investment as per their
importance most important to 1 and so on. The result is presented in table 4.

Table 4 Rank wise sector of investment

Sector of Frequency Weighted Weighted
Total Rank
investment 1 2 3 4 5 6 7 8 Value Mean
Commercial banks 52 39 12 5 1 1 110 197 1.79 1
Development Banks 5 14 16 30 28 10 7 110 450 4.09 4
Finance Companies 4 7 40 33 19 5 1 1 110 410 3.7 3
Hotels 1 11 6 10 20 16 46 110 708 6.4 7
Hydropower 44 33 9 11 10 1 2 110 254 2.3 2
Insurance
6 11 13 19 27 16 12 6 110 506 4.6 5
Companies
Manufacturing
2 7 3 11 29 45 13 110 685 6.22 6
companies
Trading companies 1 2 3 4 29 28 43 110 754 6.85 8

Source: Author’s calculation

Table 4 shows that the most preferable sector of investment for Nepalese investors is
“Commercial Bank”. It got the weighted value of 197 with the lowest weighted mean value
of 1.79 and ranked as number one. It is followed by the “Hydropower” with the weighted
mean value of 2.3. Similarly, Finance companies got 3rd rank, Development banks got 4th rank,
Insurance companies got 5th rank and Manufacturing companies and Hotels got 6th and 7th
rank respectively. Finally, the least preferred sectors of investment are trading companies, it
got 8th rank.

Further, investment strategy is driven by the why investor invest in share. This study also
attempted to find out the most preferred investment objectives of the Nepalese investors. In
this regard, the respondents are asked to rank the objective of invest in stock market as per
their importance most important to 1 and so on. The response of the ranking is presented in
table 5.
ISSN: 2091-0460 Factors Influencing Investment Decisions of Nepalese Investors 155

Table 5 Rank wise reason for stock investment

Frequency Weight Weight
Reasons of invest in share Total Rank
1 2 3 4 5 6 Value Mean
Dividend income 30 37 35 6 2 110 243 2.20 2
Expected bonus and right
23 33 40 12 1 1 110 268 2.43 3
share
Share price increment in
52 28 25 5 110 203 1.84 1
long term
Share price increment in
5 10 8 82 2 3 110 405 3.68 4
short term
No opportunities in other
1 3 83 23 110 567 5.15 5
sector
Fun and excitement in
1 2 23 84 110 629 5.71 6
investing
Source: Author’s calculation

The result presented in Table 5 clearly shows that the Nepalese investors seek share price
increment in long term as the most important investment objectives closely followed by
dividend income and expected bonus and right share. The investors found that the long term
increase in price as more important investment objectives than the short term increase in price.
The other investment objectives like no opportunity in other sector and fun and excitement in
investing has been of very less important in case of the Nepalese stock market investors.

Analysis of the factors influencing decision for investing in common stock

Various factors make influence on investment decision of individual investors. In this
study few of those factors are analyzed. In this study factors which make influence
on investment decision of individual investors are categorized into company related
variable, risk return related variables and market related variables. In company related
variables factors such as management team of the company, financial performance
of the company, size of the company, EPS, DPS are included. Similarly, in risk return
related variable expected return, past return, risk of the company, liquid securities etc.
are included. Finally, in market related variable factors such as market information,
market price per share, dividend growths etc. are included. The responses in this
regard are presented in table 6.

Table No 6 shows the responses on the observation of investors behavior related

to investment decision in stock market. It can be observed that investor prefers to
sell their investment when current market will increases as it has mean 4.28 greater
than the average value of 3.0. The investor prefers to buy shares with expectation
of increment of share price in future. It has mean value of 4.25. Similarly, investor
considers dividend income as key factor for making investment in shares. It has mean
value of 3.8636.
156 Management Dynamics, Vol.23, No.2, 2020 ISSN: 2091-0460

Fable 6 further shows that among the company related variables investor mostly
depends upon the recent financial performance of the company for making investment
decision. It has mean value of 4.2569 which is greater than the average value 3.0. As
evident from the analysis investor gives least preference to the growth and size of the
company for making investment decision. It has mean value of 3.238.
Among the risk and return related variables Investors like to invest in those companies
where expected return will be high. It has highest mean of 4.4679. Similarly, investor gives
less importance to highly liquid share for making investment. It has mean only 3.247.
Finally, Table 6 depicts that among the market related variable respondents give more
priority to market information for making investment decision. It has mean value
of 4.330. Similarly, respondents give priority to market price per share, dividend
growth trend, and high return cash flow stock respectively.

Table 6 Factors influencing investing decision in common stock

Items Mean Std. Deviation
Investment Decision
I consider dividend income as a key factor for making investment in common
3.864 0.88284
stock
I want to invest in share when shares price decreases. i.e. minimum 3.52 1.10
I prefer to buy shares with expectation of increment of share price in future. 4.25 0.94
I prefer to sell my investment when current market will increase. 4.28 1.005
Company Related Variables (CRV)
My investment decision depends upon the management team of the company. 3.917 1.08122
My investment decision depends upon the recent financial performance of the
4.257 .83226
company.
I like to invest in shares of larger companies. 3.256 .92700
The growth and size of a company depends my decision to buy the shares. 3.238 .96128
Variables related to stock (i.e., EPS, Book value per share, Dividend per share)
3.578 1.09116
of company affect my choice to buy stock.
Risk and Returns Related Variables (RRV)
I like to invest those companies where expected returns will be high. 4.468 1.03252
I compare the past returns of the companies with other companies. 3.743 .99446
Risk of the company return affects the investing decision. 3.522 .78877
Risk and Return of similar types of other companies affects the investing in
3.256 .92700
stock.
I prefer to highly liquid securities. 3.247 1.07286
Market Related Variables (MRV)
Market information is important for my stock investment. 4.330 1.02790
Market Price Per Share affects the investor's behavior on invests in stock. 4.146 .91110
I prefer to high return cash flow of the stock. 3.477 .93884
I consider dividend growth trend is considered by investors for investment in
4.082 1.08122
stocks.

Source: Author’s calculation

ISSN: 2091-0460 Factors Influencing Investment Decisions of Nepalese Investors 157

Furthermore, the factors influencing investment decision of individual investor of common

stock has been analyzed using regression analysis. For this purpose univariate, bivariate and
multivariate regression has been used. The following section presents the result of regression
analysis.

Table 7 Regression Analysis

This table shows the results based on regression model. The basic model is:

IDϳ=αₒ+α2(CRV)+α3(MRV)+α4(RRV)+εϳ

Dependent variable is the investment decision as (ID) and independent variables are
market related variable (MRV), company related variables (CRV), and risk return related
variables (RRV). The figures in the parentheses are t-values. F-statics and Adjusted R2 are
also reported.

F Number of
Model Intercept MRV RRV CRV Adj R2
-statistics observation
12.334 0.255
1 0.080 10.356 110
(10.818)** (3.218)**
11.290 0.255
2 0.112 14.606 110
(9.148)** (3.822)**
9.922 0.330
3 0.133 17.637 110
(6.853)* (4.200)**
8.677 0.143 .272
4 0.173 11.082 110
(5.574)** (2.007)* (3.294)**
9.196 0.139 0.231
5 0.149 10.430 110
(6.143)** (1.705) (2.371)**
10.134 0.138 0.198
6 0.147 9.130 110
(7.367)* (1.826) (2.701)**
8.8382 0.117 0.100 0.212
7 0.160 7.847 110
(5.325)** (1.573) (1.175) (2.173)**

*Significant at 1% level of significance

**Significance at 5% level of significance
Source: Author’s calculation

Table 7 shows the regression results of effect of company related variable (CRV), risk
and returns variables (RRV) and market related variables (MRV) on the investment
decision. Result shows that all the variables have significant positive impact on the
investment decision of investors when they are regressed individually (Model 1, 2 &
3). All the coefficients are positive and statistically significant. It means that investors
dependent on company related variable, risk and returns variable and market related
158 Management Dynamics, Vol.23, No.2, 2020 ISSN: 2091-0460

variables for making their investment decision. Though value of adjusted R2 is low,
low p value of F test confirms fitness of model.

These variables are jointly regressed in bivariate regression (Model 4, 5 & 6). The
coefficient of market related variable (MRV) and company related variable (CRV) is
positive and significant in Model 4. Similarly, Model 5 risk and return related variable
(RRV) and company related variables (CRV) are jointly regressed and the coefficient
of Company related variable found to be positive and significant. Furthermore,
when market related variable (MRV) and risk and return related variable (RRV) are
jointly regressed the coefficient of risk and return related variable (RRV) found to be
positive and significant.

Finally, all three independent variables are jointly regressed in multiple regression
Model 7. In Model 7 again the coefficient of company related variable (CRV) is found
to be significant and positive but the significance of other two variable i.e. risk return
related variable (RRV) and market related variable (MRV) is lost but the coefficient of
these two variables are still positive. It can, therefore, be concluded that the investors
investment decision strongly depends on company related variable (CRV).

Summary and Conclusion

This study focuses on the identification of the factors influencing investment decision
of individual investor of Nepalese capital market. For this purpose various aspects of
investors’ behavior has been analyzed. This study has used primary source of data
collected in January 2019 using structured questionnaire from Surket, Valley.

This study concludes that majority of investor prefer to by stock from primary market
and majority of investor analyze the company before making investment in stock.
Similarly, majority of investor monitor their portfolio occasionally and most of the
investor use own saving for making investment in stock.

Furthermore, this study concludes that most of the investor use of information
of “Electronic media” for making investment decision as well as they follow the
suggestion from “Family and friends” for making proper investment decision.
Similarly, majority of the investor ranked 1 stock of the commercial bank for making
investment and it is followed by hydropower sector. Finally, it is observed that most
of the investor invest in stock expecting share price increment in long term and it is
followed by dividend income.

Further finding of this study concludes that among the company related variable
the most important variable is financial performance of the company. Thus, it can
be concluded that investor consider the financial performance of the company for
making investment decision in Nepalese stock market. Similarly, among the risk
ISSN: 2091-0460 Factors Influencing Investment Decisions of Nepalese Investors 159

and return related variable majority of the investor prefer those companies whose
expected return will be high in future. This can, therefore, be concluded that Nepalese
investor prefers stock of those companies whose expected return will be high in
future. Furthermore, among the market related variable respondent have given more
importance on market information for making stock investment decision.

Finally, the univariate, bivariate and multivariate regression analysis also showes
that investment behavior of Nepalese investor is more influenced by company related
variable (CRV) than market related variable (MRV) and risk and return related
variable (RRV). The coefficient of company related variable (CRV) is positive and
significant in all models but the coefficients of other two variables are not significant
in all models. The coefficient of these two variables are significant in univariate
and bivariate regression but their significance is lost in multivariate regression. It
can, therefore, be concluded that the Nepalese investor makes investment decision
observing the company related variable of Nepalese companies.

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