Final answer:
The clientele effect suggests that raising dividends can attract investors and potentially boost a firm's share price, but it is not guaranteed. Other factors also influence share prices.
Step-by-step explanation:
The clientele effect is a theory in finance that suggests that a firm's dividend policy can affect its share price. According to the clientele effect, raising dividends can attract a certain type of investor who prefers regular income from dividends. These investors are more likely to buy the company's stock, which increases the demand for the stock and can lead to an increase in the share price.
However, it is important to note that the clientele effect is just one of many factors that can influence a firm's share price. Other factors such as the company's financial performance, market conditions, and overall investor sentiment also play a role in determining the share price.
So while raising dividends may attract a certain group of investors and potentially increase the share price, it is not a guarantee and should be considered in the context of the broader market and company performance.