The observed empirical fact that stocks attract particular investors based on the ﬁrm's dividend policy and the resulting tax impact on investors is called the:

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The observed empirical fact that stocks attract particular investors based on the firm's dividend policy and the resulting tax impact on investors is called the clientele effect. This effect suggests that a firm's dividend policy affects the types of investors who are attracted to the stock, based on their tax preferences. Investors who prefer high dividends are attracted to firms that pay high dividends, while investors who prefer capital gains are attracted to firms that retain earnings and reinvest them in the business. This effect is consistent with the idea that investors have different preferences and that firms can tailor their dividend policies to meet those preferences.

The Observed Empirical Fact That Stocks Attract Particular Investors Based