Finance theory’s investor-centric view shaped American corporate governance toward value maximization

Evidence

Finance theory looked at the corporation from the “outside”: from the viewpoint of the investor and of the financial markets. There is, therefore, an affinity between finance theory’s view of the corporation and the way in which the governance of corporate life, especially of American corporate life, evolved. The economist Alan Blinder (2000, p. 18) puts it well: ”… the stark assumption of [market] value maximization comes much closer to the mark today than it did a decade or two ago.” — Donald MacKenzie, An Engine, Not a Camera, 1173

Categorization

• XREF: Ties the performativity thesis to the financialization-of-corporations literature (Fligstein, Krippner) the reader is building toward. — connects to: Financial valuation theory legitimizes financiers’ power by claiming they optimize resource allocation. — Ève Chiapello, Financialisation of Valuation, 36; Accounting standards prioritize investor needs over other users, spreading financialized valuation broadly. — Ève Chiapello, Financialisation of Valuation, 57; Investor-style valuation techniques now shape public policy with coercive force — Ève Chiapello, Financialisation of Valuation, 108 (+7 more)
• QUESTION: Blinder’s remark begs the question: is value-maximization closer to the mark because the theory made it so (performativity) or because markets genuinely became more efficient?

Broader Connections

• Financialization theory links wage-compromise collapse and shareholder value to inequality #expands (0.82) — Natascha van der Zwan, Making Sense of Financialization, 109
• Financialization establishes ideological dominance of individual profit over collective interests #expands (0.75) — Aris Komporozos-Athanasiou, Speculative Communities, 109