A Note on Clienteles and the Miller Model (Revised: 5-88)

There is some empirical evidence that high tax bracket investors hold the equity of unlevered firms while low tax bracket investors hold levered firms. It has been suggested that an extension of the Miller model can provide a theory which is consistent with this observation. However, it has been stated elsewhere that this separation arises only for some sequences of shareholder voting and trading, implying that solid theoretical support for the existence of clienteles is lacking. This note argues that the sequencing of trading and voting does not affect the formation of capital structure clienteles.