Clientele effect theory, Finance Basics

Clientele Effect Theory

Advance via Richardson Petit in 1977.It stated such different types of groups of shareholders or clientele have different type of preferences for dividend depending upon their level of income from another sources. Low income earners prefer high dividends to meet their daily consumption whereas high income earners prefer low dividends to ignore payment of more tax. Consequently, when a firm sets a dividend policy, hence there will be shifting of investors into and out of the firm until equilibrium is realized. Low, income shareholders will shift to firms paying high income and high dividends shareholders to firms paying low dividends.

At equilibrium, dividend policy will be consistent along with clientele of shareholders a firm has. Dividend decision at equilibrium is irrelevant as they cannot cause any shifting of investors.

Posted Date: 1/31/2013 2:37:57 AM | Location : United States







Related Discussions:- Clientele effect theory, Assignment Help, Ask Question on Clientele effect theory, Get Answer, Expert's Help, Clientele effect theory Discussions

Write discussion on Clientele effect theory
Your posts are moderated
Related Questions
Yard Stick Required in Ratio Analysis 1. Past performance of the company The company's previous performance past ratio is needed to gauge or measure the company's present

Restrictive Bond or Debt Covenant In this case the debenture holders will impose strict conditions and terms on the borrower. These restrictions may comprise: a) No disposal

Dow theory elliot wave theory

Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% f



Example of NPV Method Resolution limited intends to purchase a machine worth Shs.1, 500,000 that will have a residue value Shs.200,000 after 5 years helpful life. The saving

evaluate the importance of leverage in financial management of a small scale company


John has just retired & she is running out of cash. Her finanical planner advises her to do reverse mortage to improve her standard of living. The current market value of her self