Financialization shifted corporate power from manufacturing and marketing executives toward financial executives.

Evidence

At the firm level, financialization manifests itself in the form of a stronger emphasis on maximizing shareholder value and an increased engagement in financial activities by nonfinancial corporations. The rise of the financial sector was accompanied by doctrines arguing for shareholder primacy in corporate governance (Davis 2005, Fama & Jensen 1983). An increasing emphasis on shareholder value was reflected in a shift of power from traditional functions such as manufacturing and marketing to financial executives (Fligstein 1990, Zorn 2004). The change was also observed in the source of profits in nonfinancial firms, as they derived a growing proportion of their overall income from financial sources by financing the lease or purchase of their products. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 21

Categorization

• XREF: Connects to the shareholder-primacy literature (Fama & Jensen, Davis) and the internal shift of corporate power described in organizational sociology. — connects to: GE’s finance arm outgrew its industrial parent and dominates its profits — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 44; Financial markets reshaped households, corporations, and states over the past 30 years. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 10; Hostile takeovers in the 1980s drove the financialization of corporations — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 49 (+7 more)

Related

• Takeover markets and institutional investors drove shareholder-value restructuring of corporations. (similarity 0.86)
• Conglomerate-era financial management prepared firms for shareholder-value financialization (similarity 0.86)
• Financialization shifts capital intermediation from institutions to markets. (similarity 0.84)
• Financialization ultimately represents markets displacing social institutions as society’s organizing principle. (similarity 0.84)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.82)
• Financialization shifts firm investment from core business toward finance, weakening workers’ claims on revenue. (similarity 0.82)
• Hostile takeovers in the 1980s drove the financialization of corporations (similarity 0.82)
• Financialization theory rejects bank dominance in favor of integrated finance-industrial capital (similarity 0.82)
• Financialization both derives profits from finance and drains capital from productive investment (similarity 0.81)
• Finance has come to dominate American economic life. (similarity 0.81)
• Nearly 40% of S&P 500 earnings came from financial activities by 2000 (similarity 0.81)
• Corporate management shifted from ignoring to obsessing over stock prices (similarity 0.81)
• Nonfinance firms increasingly derived income from financial markets (similarity 0.81)
• GE’s finance arm outgrew its industrial parent and dominates its profits (similarity 0.80)
• Financial markets reshaped households, corporations, and states over the past 30 years. (similarity 0.80)

Broader Connections

• Takeover markets and institutional investors drove shareholder-value restructuring of corporations. #expands (0.80) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 31
• Hostile takeovers in the 1980s drove the financialization of corporations #qualifies (0.75) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 49