Question
Apart from proforma earnings statements, several other factors can influence stock prices. These include the overall health of the economy, interest rates, inflation, the political climate, changes in management, product launches, mergers and acquisitions, and even natural disasters. Investor sentiment and market speculation also play a significant role in influencing stock prices.
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In his article for Harvard Business Review, Baruch Lev – the Philip Bardes Professor of Accounting and Finance at the Stern School of Business in NYU, talks about proforma as one of the ways in which managers can impart useful information to investors. (For more like this, check out our book summary). Lev stresses that "research shows that proforma earnings statements prominently displayed in the headline or first paragraph of a company's news release have a much stronger impact on stock prices than proforma earnings reported elsewhere in the document."
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