The clientele effect is the idea that the set of investors attracted to a particular kind of security will affect the price of the security when policies or circumstances change. For instance, some investors want a company that doesn't pay dividends but instead invests that money in growing the business, whereas other investors prefer a stock that pays a high dividend, and still others want one that balances payout and reinvestment. If a company changes its dividend policy substantially, it is said to be subject to a clientele effect as some of its investors (its established clientele) decide to sell the security due to the change. Although commonly used in reference to dividend or coupon (interest) rates, it can also be used in the context of leverage (debt levels), changes in line of business, taxes, and other aspects of the company.
Famous quotes containing the words clientele and/or effect:
“The bar ... is an exercise in solitude. Above all else, it must be quiet, dark, very comfortable—and, contrary to modern mores, no music of any kind, no matter how faint. In sum, there should be no more than a dozen tables, and a clientele that doesn’t like to talk.”
—Luis Buñuel (1900–1983)
“Reckoned physiologically, everything ugly weakens and afflicts man. It recalls decay, danger, impotence; he actually suffers a loss of energy in its presence. The effect of the ugly can be measured with a dynamometer. Whenever man feels in any way depressed, he senses the proximity of something “ugly.” His feeling of power, his will to power, his courage, his pride—they decline with the ugly, they increase with the beautiful.”
—Friedrich Nietzsche (1844–1900)