The existence of dividend clienteles suggest that firms can change their dividend policy frequently with no potential adverse effect on the firm.

Question

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The existence of dividend clienteles suggests that different groups of shareholders prefer different dividend policies. If a firm changes its dividend policy frequently, it may upset these groups and potentially harm the firm by causing shareholders to sell their shares. Therefore, firms should consider the preferences of their dividend clienteles when setting dividend policy and make changes cautiously.

The Existence of Dividend Clienteles Suggest That Firms Can Change