The ______ effect is the tendency of a firm to attract the type of investor who prefers its dividend policy.

Question

Quizplus · Accepted Answer

The phenomenon described in the question is known as the clientele effect. This effect occurs when a firm's dividend policy attracts a specific type of investor who prefers the company's approach to dividend payments. As a result, the mix of investors holding the firm's shares can affect its dividend policy over time. The other options listed in the question (residual dividend, signaling, investor, and dividend preference) are related to dividend policy but do not describe the effect in question.

The ______ Effect Is the Tendency of a Firm to Attract