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
journal contribution
posted on 2023-06-09, 18:28 authored by Samuel KnafoSamuel Knafo, Sahil Jai DuttaThis 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 EconomyISSN
0969-2290Publisher
Taylor & FrancisExternal DOI
Issue
3Volume
27Page range
476-499Department 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
2019-07-22First Open Access (FOA) Date
2021-02-07First Compliant Deposit (FCD) Date
2019-07-19Usage metrics
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