What is the clientele effect?

Once a company has established a set of policies – whether it be their dividend policy or environmental, social, and corporate governance policies, the clientele effect outlines the importance of refraining from making dramatic changes to such policies to prevent a shift in clientele, which may negatively impact the company’s share price.

What is a dividend clientele effect?

A specific instance of this effect is dividend clientele, a term for a group of stockholders who share the same opinion on how a specific company conducts its dividend policy. The clientele effect is a change in share price due to corporate decision-making that triggers investors' reactions.

What is an example of a clientele?

Examples of two different clienteles can be retired investors (those who may prefer stocks with a high dividend payout) and young investors (those who may prefer stocks that show strong capital appreciation).

Which theories ignore the clientele effect?

Certain theories, such as those proposed by Walter and Gordon , completely disregard the clientele effect. The theories proposed by Walter and Gordon study the impact of organizational policies on firm value by comparing the investor's required rate of return with the organization's return on investments.