Corporate financialisation: a conceptual clarification and critical review of the literature
Date
2024-05
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Southern Centre for Inequality Studies
University of the Witwatersrand, Johannesburg
University of the Witwatersrand, Johannesburg
Abstract
Corporate financialisation (CF) comprises a major field of financialisation studies centred on the belief that significant changes in corporate governance and business models have been driven by financial imperatives, which have had a profound impact on investment habits, labour policies, organisational practices and the distribution of revenues. Experiencing explosive growth in recent years, this field has become mired in conceptual ambiguity, mirroring problems with financialisation studies as a whole. While seeking to restore some conceptual clarity and clearly delineate the boundaries of the concept, this paper offers a detailed review of empirical work on CF. At the core of the field, we identify four sub-theories, each addressing distinct aspects of the way business models have become financialised under the influence of shareholder value principles. Our dissection of the literature shows, however, that these theories mostly remain under-substantiated. The connection of financialisation strategies to key outcomes of interest, such as declining investment and rising inequality, remains nebulous in most cases. Beyond this, we identify key weaknesses in the way shareholder value orientation – the causal lynch pin of CF accounts – has been theorised. The field as a whole has paid insufficient attention to the variegated and uneven nature of the shareholder revolution, which has prevented a single uniform set of governance principles from diffusing. We also argue that the tendency to dilute definitions of corporate financialisation across explanans and explanandum has masked problems of verification. The critique concludes with a call for conceptual clarity and more care in distinguishing financialisation from causal channels associated with other structural dynamics, such as monopolisation.
Description
Keywords
Corporate finance, Corporate governance, Business models, Investment
Citation
Rabinovich, J. & Reddy, N. (2024, May) Corporate financialisation: a conceptual clarification and critical review of the literature. (SCSI Working paper No. 66). Johannesburg: Southern Centre for Inequality Studies. https://hdl.handle.net/10539/38628