If a firm caters to a set of investors with its dividend policy of paying consistently high dividends, what theory is consistent with this dividend policy?

Question

Quizplus · Accepted Answer

The Clientele Effect theory suggests that firms tend to attract and retain a set of investors with similar preferences for dividends by catering to their desires for a particular type of dividend policy. In this case, the firm is catering to investors who prefer consistently high dividends, which is consistent with the Clientele Effect theory.

If a Firm Caters to a Set of Investors with Its