Those who believe investors choose a particular share due to the firm's dividend policy would contend that firm should consider the __________ effect when changing dividend policies.

Question

Quizplus · Accepted Answer

The clientele effect suggests that investors tend to prefer certain dividend policies and choose stocks based on those policies. Therefore, if a firm changes its dividend policy, it may lose some investors who were attracted to the previous policy. The firm should consider this effect when making changes to its dividend policy.

Those Who Believe Investors Choose a Particular Share Due to the Firm's