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Essay / Research Paper Abstract
This 3-page paper discusses the clientele effect on the movement of stock prices, and outlines what could impact investors' decisions to buy or sell stock. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: AS43_MTclienpayo.doc
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Unformatted sample text from the term paper:
stock, theyll buy a lot of it, the cost will go up, and shares will dwindle. The same thing happens when investors decide to unload their stocks - the price
drops. But what causes stock prices to move? Many point out that a companys financial reports have an impact on a stock price.
So does the so-called "clientele effect." The theory behind the clientele effect (and payout clientele) is that a companys stock price moves
according to investor reaction to a tax, dividend or a policy change that might impact the company (Clientele Effect n.d.). The clientele effect theory assumes that investors will be attracted
to different company policies, and whenever that policy changes, investors buy or sell acccordingly - and as they buy and sell, the stock prices move (Clientele Effect n.d.).
Now, from the payout point of view, if a company pays a high dividend, it will attract investors with the investment goal to buy stock
that has a high dividend payout (Clientele Effect n.d.). As such, if the company makes the decision to decrease its dividend, the investors will sell their stock, and the share
price will decline (Clientele Effect n.d.). The clientele effect tends to be temporal (i.e., based on timing) and theyre based on clientele
expectations and capital sources as well (Hardin & Wu 2008). If a dividend payout is high, for example, then the company will attract investors who like the high dividend payout.
If, however, a board of directors decides to end the shareholder dividend, those who own shares of the company because of dividend payouts will likely put their blocks of stock
...