If stockholders care about taxes, then stocks should attract clienteles based on dividend yields. Surveys support this by showing that the highest dividend yield stocks are held by investors in the:

Question

Quizplus · Accepted Answer

Investors in the lowest tax bracket are more likely to hold the highest dividend yield stocks because they face lower tax liabilities on dividend income compared to investors in higher tax brackets. This aligns with the clientele effect theory, suggesting that investors choose stocks that best fit their tax situation.

If Stockholders Care About Taxes, Then Stocks Should Attract Clienteles