The clientele effect maintains that many investors choose stocks at least in part for dividend policy, so any change in payments is disruptive, because it represents:

Question

Quizplus · Accepted Answer

The clientele effect suggests that some investors are attracted to a particular company because of its dividend policy, and any change in that policy can cause the investors to feel disenchanted as it takes away something they like or are familiar with. Therefore, option D stating that any change away from something they like about the firm is the most relevant explanation for the disruptive effect of any alteration in dividend policy.

The Clientele Effect Maintains That Many Investors Choose Stocks at Least