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 clientele effect. Shareholders who prioritize receiving consistent and predictable dividends are more likely to invest in companies that have a history of paying such dividends, thus creating a "clientele" of shareholders with similar preferences.

Clientele Effect Is the Argument That a Firm Attracts Shareholders