Clientele Effect

AAA

DEFINITION of 'Clientele Effect'

The theory that a company's stock price will move according to the demands and goals of investors in reaction to a tax, dividend or other policy change affecting the company. The clientele effect assumes that investors are attracted to different company policies, and that when a company's policy changes, investors will adjust their stock holdings accordingly. As a result of this adjustment, the stock price will move.

INVESTOPEDIA EXPLAINS 'Clientele Effect'

Consider a company that currently pays a high dividend and has attracted clientele whose investment goal is to obtain stock with a high dividend payout. If the company decides to decrease its dividend, these investors will sell their stock and move to another company that pays a higher dividend. As a result, the company's share price will decline.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Corporate Action

    Any event that brings material change to a company and affects ...
  3. Material News

    News released by a company that might affect the value of its ...
  4. Stock

    A type of security that signifies ownership in a corporation ...
  5. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
  6. Dividend Policy

    The policy a company uses to decide how much it will pay out ...
Related Articles
  1. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  2. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  3. Investing

    Crowdfunding: Wide Opening For Tech Investors

    Crowdfunding has dramatically changed investing and opened the door for the public to get in on all types of exciting startups, including tech firms.
  4. Mutual Funds & ETFs

    Which ETF is the Best Bet: VTI or IWV?

    A look at two quality ETFs that offer diversification, low expense ratios, and exposure to the total market.
  5. Professionals

    Ready For The Entrepreneurial Leap?

    There are key traits and motivations that characterize an entrepreneur; these aren't necessarily genetic, but can be acquired over time.
  6. Investing Basics

    Here's How To Tap International Markets

    Access to foreign markets has grown a lot in recent years, allowing US market players to trade these bourses in real-time.
  7. Investing

    What's a Small Cap Stock?

    The “cap” in small cap stocks refers to a company’s capitalization as determined by the total market value of its publicly traded shares. Small cap stocks are generally defined as the stock of ...
  8. Investing

    What is Market Value?

    Market value is the price of an asset that is traded or offered for sale in a public forum where multiple buyers are allowed to make offers to buy that asset.
  9. Professionals

    What is a Corporation?

    A corporation is an organization—usually a large business—with specific characteristics.
  10. Investing Basics

    What is Securitization?

    Securitization is the process of converting an asset, or group of assets, into a marketable security. Often times, the securitized assets are divided into different layers, or tranches, tailored ...

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center