Hostile takeovers in the 1980s drove the financialization of corporations

Evidence

In the United States, the proximate cause of the financialization of the corporation was a wave of hostile takeovers in the 1980s. After two decades of conglomerate expansion, the typical American corporation in 1980 was highly diversified, operating in many unrelated industries (cf. Fligstein 1990). Diversification created a pervasive conglomerate discount in which firms operating in multiple industries were worth less on the stock market than they would be if they were a collection of separate focused firms (Zuckerman 1999). In other words, the whole was worth less than the sum of the parts. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 49

Categorization

• XREF: The conglomerate discount ties to classic finance literature on diversification discount and Schumpeterian creative destruction. — connects to: Deregulation let non-finance firms pursue financial activities, fueling debt expansion — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 40; Financialization shifted corporate power from manufacturing and marketing executives toward financial executives. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 21; Takeover markets and institutional investors drove shareholder-value restructuring of corporations. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 31 (+8 more)

Related

• Hostile-takeover markets and Reagan politics, not finance theory, drove 1980s financialization (similarity 0.88)
• Takeover markets and institutional investors drove shareholder-value restructuring of corporations. (similarity 0.88)
• The mid-1980s bull market was driven by liberalization and leveraged buyouts (similarity 0.86)
• Conglomerate-era financial management prepared firms for shareholder-value financialization (similarity 0.86)
• US public corporations were dismantled in the 1980s as capitalism shifted toward financial speculation (similarity 0.85)
• Financialization shifted corporate power from manufacturing and marketing executives toward financial executives. (similarity 0.82)
• Corporate raiders acquired firms via shareholder control, leveraged debt, and asset stripping (similarity 0.80)

Broader Connections

• Hostile-takeover markets and Reagan politics, not finance theory, drove 1980s financialization #corroborates (1.00) — Donald MacKenzie, An Engine, Not a Camera, 1175
• US public corporations were dismantled in the 1980s as capitalism shifted toward financial speculation #expands (0.85) — Shoshana Zuboff, The Age of Surveillance Capitalism, 128
• Corporate raiders acquired firms via shareholder control, leveraged debt, and asset stripping #expands (0.80) — Andrew deWaard, Derivative Media, 238
• The mid-1980s bull market was driven by liberalization and leveraged buyouts #corroborates (0.75) — Donald MacKenzie, An Engine, Not a Camera, 816