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. Corporate Action

    Any event that brings material change to a company and affects ...
  2. Stock

    A type of security that signifies ownership in a corporation ...
  3. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  4. Material News

    News released by a company that might affect the value of its ...
  5. Dividend Policy

    The policy a company uses to decide how much it will pay out ...
  6. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
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. Trading Strategies

    How effective is creating trade entries after spotting a Sanku (Three Gaps) Pattern?

    Learn about the sanku, or three gaps, pattern including formation, interpretation and additional confirmation necessary to establish effective trades.
  4. Trading Strategies

    How do I build a profitable strategy when spotting a Rounding Bottom pattern?

    Understand the basics of the rounding bottom pattern, also known as the saucer, including formation and optimal entry and exit points.
  5. Trading Strategies

    How do I build a profitable strategy when spotting a Runaway Gap pattern?

    Understand the basics of the runaway gap and how to utilize this pattern to establish profitable trade strategies, including necessary confirmations before entry.
  6. Trading Strategies

    How effective is creating trade entries after spotting a Runaway Gap pattern?

    Understand the basics of the runaway gap and why strategies based on this signal, unlike other types of gaps, have only middling effectiveness.
  7. Trading Strategies

    How effective is creating trade entries after spotting a Rounding Bottom pattern?

    Understand the basics of the rounding bottom pattern, including formation and interpretation and how this pattern lends itself to effective trade strategy.
  8. Investing Basics

    What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in the secondary market.
  9. Fundamental Analysis

    How accurate or important is the debt service coverage ratio (DSCR) in evaluating whether to invest ...

    See how investors can use the debt service coverage ratio to evaluate the solvency of a company before making an investment decision.
  10. Fundamental Analysis

    Should I care about the book value per common share when dealing with a blue chip stock?

    See why shareholders of any listed company, even owners of blue chip stock, should care about what the book value per common share is.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center