Research Handbook on Political Economy and Law
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Research Handbook on Political Economy and Law

Edited by Ugo Mattei and John D. Haskell

Events such as the global financial crisis have helped reveal that the drivers and contours of governance on a national and international level remain a mystery in many respects. Set in this context, this timely Research Handbook is the first to explicitly address the constitutive relationship between law and political economy. With scholarly contributions from diverse disciplinary and geographic backgrounds, this authoritative book covers, in three parts, topics surrounding money and markets, the relations of organization, and commodities, land and resources.
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Chapter 9: Financialization and the nonfinancial corporate sector

Özgür Orhangazi


Financial activities include lending and borrowing activities and dealings in financial assets such as stocks, bonds, derivatives, foreign exchange and so on. Nonfinancial activities, on the other hand, consist of production and distribution of goods and services that are not directly related to financial activities. Finance moves purchasing power across different actors in the economy through credit or transfer of ownership rights to assets, which shifts wealth from one form to another and is expected to bring payments over time. In the post-1980s era, the size, importance and power of financial markets, transactions and institutions have greatly increased. Financial motives and financial elites have come to dominate the economy. These changes have been analyzed through the concept of financialization. Some have interpreted financialization as a shift from productive to financial activities, while others have stressed the dominance of finance in general over economic activities. At the same time, scholars have pointed out that financialization involves changes in the relationship between the nonfinancial corporate sector and financial markets. On the one hand, nonfinancial corporations have begun acquiring more and more financial assets and deriving a larger share of their revenue from financial sources. On the other hand, the managers of nonfinancial corporations have come under increased pressure from financial markets to maximize short-run returns, which has led to increased payments to financial markets in the forms of interest payments, dividend payments and stock buybacks.

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