Factors Influencing Share Price of a firm

All sorts of influences affect share prices. These influences include:

1. The recent profit record of the company especially the recent dividend paid to shareholders and the prospects of their growth and stability.
2. The growth prospects of the industry in which the company operates.
3. The publication of a company’s financial results i.e. Balance Sheet and profit and loss statement.
4. The general economic conditions situations e.g. boom and recession e.g. during boom, firms would have high profits hence rise in prices.
5. Change in company’s management e.g. entry and exit of prominent corporate personalities.
6. Change on Government economic policy e.g. spending, taxes, monetary policy etc. These changes influence investors’ expectations.
7. Rumour and announcements of impending political changes e.g. General elections and new president will cause anxiety and uncertainty and adversely affect share prices.
8. Rumours and announcement of mergers and take-over bids. If the shareholders are offered generous terms/prices in a take-over, share prices could rise.
9. Industrial relations e.g. strikes and policies of other firms.
10. Foreign political developments where the economy heavily depends on world trade.
11. Changes in the rate of interest on Government securities such as Treasury Bills may make investors switch to them. Exchange rates will also encourage or discourage foreign investment in shares.
12. Announcement of good news e.g. that a major oil field has been struck or a major new investment has been undertaken. The NPV of such investment would be reflected in share prices.
13. The views of experts e.g. articles by well-known financial writers can persuade people to buy shares hence pushing the prices up.
14. Institutional buyers such as insurance companies can influence share prices by their actions.
15. The value of assets and the earnings from utilization of such assets will also influence share prices

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