Conglomerate-era financial management prepared firms for shareholder-value financialization

Evidence

Because of global manufacturing market saturation and antitrust legislation at that time, large firms in the United States attempted to maintain profitability by turning into multifunction cross industry conglomerates. A consequence was that finance gradually rose as the metagovernance structure for the largest firms in the United States ðFligstein 2001; Crotty 2003Þ. While managers and workers of the subunit possessed firmand industry-specific human capital and are thus committed to production and sales, the financial managers at the top began to conceive of subunits as tradable assets that should be evaluated, eliminated, or acquired according to their expected returns. We believe that the transition to the finance conception of the firm prepared the episteme and techne to engage in financial activities for nonfinance firms. This transition accelerated in the 1980s when shareholder value goals began to dominate corporate strategy, displacing long-term market share as the metric of CEO success with goals of short-term profitability and stock price gains ðDobbin and Zorn 2005; Krier 2005; Davis 2009; Goldstein 2012Þ. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 38

Categorization

• XREF: connects to: Hostile takeovers in the 1980s drove the financialization of corporations — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 49; Takeover markets and institutional investors drove shareholder-value restructuring of corporations. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 31

Related

• Financialization shifted corporate power from manufacturing and marketing executives toward financial executives. (similarity 0.86)
• Hostile takeovers in the 1980s drove the financialization of corporations (similarity 0.86)
• Takeover markets and institutional investors drove shareholder-value restructuring of corporations. (similarity 0.86)
• Corporate management shifted from ignoring to obsessing over stock prices (similarity 0.79)

Broader Connections

• Hostile takeovers in the 1980s drove the financialization of corporations #complicates (0.75) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 49
• Takeover markets and institutional investors drove shareholder-value restructuring of corporations. #complicates (0.72) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 31