University of Sussex
Browse
The Financialisation of the Firm and the Myth of the Shareholder Revolution - Final submission.pdf (357.16 kB)

The myth of the shareholder revolution and the financialization of the firm

Download (357.16 kB)
journal contribution
posted on 2023-06-09, 18:28 authored by Samuel KnafoSamuel Knafo, Sahil Jai Dutta
This article re-examines the shareholder value revolution of the 1980s to challenge the dominant conception of the financialization of the firm. This transformation is widely interpreted as a re-alignment of corporate management in response to growing shareholder power and neoliberal managerial norms associated notably with agency theory. By contrast, we demonstrate how the financialization of the firm has its roots in the innovations made in 1960s America by a small group of outsider firms, the conglomerates, that challenged the corporate establishment. As we show, these firms pioneered financial techniques that profoundly transformed the nature of corporate strategy and launched a process of financialization as firms began to exploit the leverage financial markets could provide in various corporate contests. Taking stock of this historical lineage leads us to re-interpret the shareholder revolution of the 1980s. We demonstrate how the key features of this era: the orientation of firms towards capital market, the increase in shareholder activism, and the rise of agency theory, should be read as unintended outcomes of the success of financialized management and its destabilizing effects on corporate governance.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Review of International Political Economy

ISSN

0969-2290

Publisher

Taylor & Francis

Issue

3

Volume

27

Page range

476-499

Department affiliated with

  • International Relations Publications

Research groups affiliated with

  • Centre for Global Political Economy Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2019-07-22

First Open Access (FOA) Date

2021-02-07

First Compliant Deposit (FCD) Date

2019-07-19

Usage metrics

    University of Sussex (Publications)

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC