Clientele Effect


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.

BREAKING DOWN '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.

  1. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
  2. Dividend

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

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

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

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

    The policy a company uses to decide how much it will pay out ...
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