The clientele effect is the argument that a firm attracts shareholders whose preferences with respect to the payment and stability of dividends corresponds to the payment pattern and stability of the firm itself.

Question

Quizplus · Accepted Answer

The statement accurately describes the concept of the clientele effect. It suggests that a firm's dividend policy can affect the composition of its shareholder base, as investors with different preferences may be attracted to a company based on its dividend payments and stability.

The Clientele Effect Is the Argument That a Firm Attracts