The Financialization of the Firm

The Financialization of the Firm

Managerial and Social Implications

Alexander Styhre

The term ‘financialization’ denotes the general tendency in the advanced Western economies to allow a substantial proportion of taxable profits to accumulate in the finance industry. Alexander Styhre discusses the financialization of the firm in the period after 1980 and stresses how key managerial activities have been redefined on the basis of finance theory and free-market ideologies. This book critically examines the literature and the implications of financialization for organizations and the economy as a whole.

Chapter 2: What is financialization?

Alexander Styhre

Subjects: business and management, corporate governance, organisation studies, social policy and sociology, sociology and sociological theory


In this chapter, the concept of financialization will be critically examined and related to a variety of changes in the environment of the firm including macroeconomic changes during the 1970s, the shift in policy on economic and regulatory issues, the growth of new academic disciplines including finance theory as a special branch of neoclassical economic theory, and the growth of a neoconservative and neoliberal ideology in the Anglo-American world. All these changes suggest that financialization is overdetermined by a series of interrelated events and changes whose aggregate consequences could not really be foreseen by any actor being part of the policy-making and decision-making leading to today’s financialized economy. Therefore, when examining the financialization of the economy, there is not much room for conspiracy theories (possibly appealing to left-leaning analysts and commentators), nor for Hegelian-style acclaims of the irresistible advancement of an increasingly rational society based on reason, clarity and Vernuft (possibly favored by right-leaning analysts and commentators), but rather the explanation for the financialization of the economy is to be sought in the various down-to-earth attempts to handle day-to-day matters and concerns, taken together leading to new possibilities but also to new problems and what economists speak of as externalities (Krippner, 2011).

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