Clientele Effect

The clientele effect refers to the tendency of different groups of investors, known as clienteles, to prefer certain types of investments or securities based on their specific tax or income preferences. For example, some investors might prefer stocks with high dividend payouts for immediate income, while others might prefer growth stocks with low dividends to maximize long-term capital appreciation. Companies may attract specific clienteles by adjusting their dividend policies or other financial strategies to meet the preferences of these investor groups.

Example

A company that shifts from paying high dividends to reinvesting profits for growth may lose investors seeking regular income (income clientele) but attract growth-oriented investors (growth clientele).