Financialization does not measurably raise firm profits or financial-asset productivity.

Evidence

We find no growth in the productivity of financial assets, and financial assets consistently underperformed nonfinancial assets in the production function. We also developed a firm-level analysis that indicates that financialization does not translate into higher profit. Firms that reported interest income or financial investment or owned a financial subsidiary did not earn significantly more pretax income than other firms. In fact, industrywide dependence on financial income is associated with a future decline in profits for nonfinance firms in the period of analysis ðsee app. FÞ. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 179

Categorization

• DEEPTHINKING: A direct empirical rebuttal to the marginal productivity justification for finance-driven compensation — the core load-bearing finding of the chapter.
• QUESTION: Worth chasing where the appendix F firm-level analysis and its specification live, since the ‘future decline in profits’ result is causally suggestive.
• ADDENDUM: Parallels the ‘Complaints About Immodesty Go Way Back’ thread that claims of financial worth are ideology-loaded, though the fit is loose.
• XREF: connects to: Financialization must be measured by profit generation, not employment or output — Greta R. Krippner, The Financialization of the American…, 14; Financialization means accumulation through financial channels rather than production — Greta R. Krippner, The Financialization of the American…, 11; Finance manages rather than creates value under capitalism. — Max Haiven, Cultures of Financialization, 98 (+1 more)

Related

• Financialization must be measured by profit generation, not employment or output (similarity 0.87)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.86)
• Financialization both derives profits from finance and drains capital from productive investment (similarity 0.86)
• Nonfinance firms’ financial gains are funded by production-derived cash flows, not new productivity (similarity 0.86)
• Financialization can be measured by comparing non-financial firms’ portfolio income to their cash flow. (similarity 0.85)
• Financialization shifts firm investment from core business toward finance, weakening workers’ claims on revenue. (similarity 0.85)
• Nonfinance firms increasingly derived income from financial markets (similarity 0.84)
• Financialization cannot be reduced to stock market developments. (similarity 0.84)
• Nearly 40% of S&P 500 earnings came from financial activities by 2000 (similarity 0.83)
• Financialization is measured as the ratio of financial receipts to business receipts. (similarity 0.83)
• Financialization marks a decisive shift from production-based to finance-driven accumulation. (similarity 0.83)
• Financialization channels income toward the wealthy and depresses productive investment and wages. (similarity 0.83)
• Prior research linked financialization to inequality mostly indirectly, not causally. (similarity 0.83)
• Financialization means accumulation through financial channels rather than production (similarity 0.83)
• Financial profits relative to non-financial profits rose three to fivefold by the late 1990s. (similarity 0.82)

Broader Connections

• Financialization must be measured by profit generation, not employment or output #qualifies (0.85) — Greta R. Krippner, The Financialization of the American…, 14
• Financialization means accumulation through financial channels rather than production #corroborates (0.80) — Greta R. Krippner, The Financialization of the American…, 11
• Finance manages rather than creates value under capitalism. #expands (0.75) — Max Haiven, Cultures of Financialization, 98
• Financialization weakened rather than strengthened individual financial institutions #corroborates (0.75) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 106