Corporate spin-offs inflate portfolio income measures independently of financial orientation

Evidence

The practice of ‘spinning off’ divisions into subsidiaries directly affects the interpretation given to the portfolio income data: as the majority stock owner, the parent company receives dividends paid out by the subsidiary corporation. Since dividend income is a component of portfolio income, part of the upward trend in that measure in the last two decades could simply reflect this form of corporate reorganization rather than the growing orientation of non-financial firms to financial markets. However, it should be noted that the timing of subsidiary formation does not correspond closely to the trend in portfolio income observed in Figure 4, suggesting that if subsidiary formation has contributed to these results,it does not determine them. — Greta R. Krippner, The Financialization of the American…, 90

Categorization

• QUESTION: Worth remembering that portfolio income trends in financialization data can be artifacts of corporate reorganization rather than real orientation shifts.
• XREF: connects to: Nonfinance firms increasingly derived income from financial markets — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 18; Financialization can be measured by comparing non-financial firms’ portfolio income to their cash flow. — Greta R. Krippner, The Financialization of the American…, 47; Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s — Greta R. Krippner, The Financialization of the American…, 56 (+2 more)

Related

• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s (similarity 0.84)
• Financialization can be measured by comparing non-financial firms’ portfolio income to their cash flow. (similarity 0.84)
• Nonfinance firms increasingly derived income from financial markets (similarity 0.84)
• Multi-layered subsidiary ownership now prevails over the multidivisional corporate form in the US (similarity 0.80)
• Company-level industry classification can misallocate financial subsidiaries to non-financial sectors. (similarity 0.78)
• Financialization cannot be reduced to stock market developments. (similarity 0.78)