This article uses the correlation analysis, factor analysis and the multiple linear regression to analyze the impact of financial performance on the market price of the share. It concludes that the market price of a share is mainly determined by the forces of supply and demand of a security in the market.

The financial performance of a company, particularly its records of earnings, dividends, growth and future prospects shapes the primary trends of its share prices. Any event or change in policy would affect its share prices. The fluctuation in security prices, which occur due to various reasons, is a known feature in the stock markets. The factors that cause these fluctuations, besides financial performance of a company, are government polices, projects completion, bonus issues, management decision and of course the manipulations by the security holders.

The health and stability of a company can be analyzed by studying its financial statements, published in its annual reports or other journals or newspapers. The overall financial performance of a company can be known when the financial data is compared over a period of time. The effect of this financial performance on the share prices can also be ascertained.

There are several empirical works pertaining to the pricing of equities. Pandey examined the impact of leverage on equity prices and concluded that Modigliani-Miller hypothesis is not supported. Zahir et al., found that dividend per share is the most important variable affecting the share price, followed by dividend, yield, book value per share, coverage and return on investment. Balakrishnan also found that the current dividend and book value per share are more important determinants of market prices as compared to earnings per share and coverage. Dixit showed that dividend is the most important determinant of share price. Tuli Nishi et al. made an attempt do determine price-earning ratio of 105 companies in India for the period 1989-93 and found variability in market price, dividend payout ratio, and earning per share to be significant variables, and size, debt equity ratio and growth to be insignificant. Raj Ojha analyzed the impact of earning per share, retained earnings and dividend per share on share price. He selected a sample of 14 large size cotton textile firms for the year 1961 and identified that dividend was observed to be the most powerful variable influencing share price, as its effect was almost two times higher than that of the retained earnings.

Portfolio Organizer Magazine, Multiple Linear Regressions, Financial Markes, Stock Markets, Government Polices, Financial Statements, Equity Markets, Regression Analysis, Principal Component Analysis, Equity Shareholders, Government Polices.