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
Blue Chips and Going Short or Long on Share - Stock Market Blue Chips Are first class securities of firms that have sound share capital and are internationally

Explain about the functions of financial systems. Financial systems perform the necessary economic function of channelling funds through units who have stored surplus funds to

What are the Advantages of placement Placement has the below benefits: (i) Timing of issue is significant for successful floatation of shares. In a depressed market cond

Formation of Sole Proprietorship Business When an individual plans to start a business, his or her main objective is to earn profit but there are a number of factors to take in

what do you consider to be the main inbound logistics for banking

Conduct research and explain the companies, their operations, locations, markets, and lines of business. Collect financial statements for the past three years, fiscal or calendar .

if u were the professor wht your opinion about vincent mind stage

Access the relevant authoritative literature on accounting for the transfer of financial assets. What conditions must be met for a transfer of receivables to be accounted for as a

(a) State the most appropriate drivers for the following direct expenses: (i) New business administration department's salary costs (ii) Medical examinations for temporary life

Critize the flexible exchange rate regime from the viewpoint of the proponents of the fixed exchange rate regime