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

Knafo, Samuel; Dutta, Sahil Jai

doi:10.1080/09692290.2019.1649293

Cited by 51 publications

(33 citation statements)

References 38 publications

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“…But from the 1980s onwards the predominant strategy has been to downsize operations and distribute earnings to shareholders in the form of dividend payments and stock buybacks. Much has already been said about the origins of the shareholder value revolution (Heilbron et al 2014, Knafo andDutta 2020), with some of the most prominent studies linking it to changing patterns of accumulation and structural shifts in the global political economy (Duménil and Levy 2004, Stockhammer 2004, Milberg and Winkler 2013, the rise of 'agency theory' within financial economics (Fligstein 2001), as well as transformations in government policy and regulation (Davis 2009, Krippner 2011. While rich in theoretical insights and historical-empirical details, what is often neglected in this literature is the disaggregate perspective.…”

Section: Who Distributes Who Downsizes?mentioning

confidence: 99%

The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power

Baines

Hager

2021

New Political Economy

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Section: Who Distributes Who Downsizes?mentioning

confidence: 99%

The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power

Baines

Hager

2021

New Political Economy

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“…His recent work on 'shareholder value' -the corporate practice of privileging the inflation of company stock prices -echoes the logic of his reasoning on the gold standard. 29 Whereas political economists tend to frame the emergence of shareholder value as an expression of the growing constraints imposed upon managers by speculative financiers, Knafo (and his former student Sahil Dutta) have traced its origins to efforts by US managers to revolutionise corporate strategy. In the 1960s, a small number of conglomerates began to use innovations in US finance to leverage new tactics based on aggressive takeovers and asset-stripping.…”

Section: Historicising Knafo and Teschkementioning

confidence: 99%

Two Historicisms: Unpacking the Rules of Reproduction Debate

Zacarés

2021

Hist. Mater.

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Knafo and Teschke’s provocative essay ‘Political Marxism and the Rules of Reproduction of Capitalism’ has prompted considerable debate. From a position of critical support, the present article intervenes in this debate by making three interrelated points. First, the structuralist–historicist divide that Knafo and Teschke identify is misleading and should be reformulated. Though the duality is real, this divide is best understood as a continuum between two kinds of historicism: a structural and an institutional historicism. Second, the article contextualises Knafo and Teschke’s intervention against the backdrop of their own intellectual development. Rather than returning to the tradition’s historicist origins, they have in fact stretched Political Marxism’s institutional tendencies to new limits. Third, the article concludes with a revision of their critique of the concept of market dependence. It is argued that the concept can be salvaged for the purposes of institutional historicism provided that it is rearticulated.

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“…As one interviewee emphasised, 'shareholders have power legally, [but] unless something has gone dreadfully wrong, they tend to be fairly inert'. 10 Through this changed organisational form, as corporations exchanges became more independent and self-determined (Aggarwal 2002, on corporate agency, see also Knafo and Dutta 2020). From being mere marketplacesnational, membercontrolled, non-profit organisations and physical trading locations with a trading monopoly but little agency of their ownexchanges have become (more) self-determined actorsdemutualised, selflisted, profit-driven and globally active technology companies that operate (electronic) marketplaces around the world and across asset classes (Figure 3).…”

Section: Exchanges Transformed: the New Business Model Of Global Exchmentioning

confidence: 99%

From National Marketplaces to Global Providers of Financial Infrastructures: Exchanges, Infrastructures and Structural Power in Global Finance

Petry

2020

New Political Economy

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This paper analyses the role of (stock and derivative) exchanges as powerful actors in global finance. While most IPE accounts of exchanges analyse 'exchanges as marketplaces' and focus on equity market trading, they miss how exchanges have fundamentally transformed in the last 25 years. Through marketisation, internationalisation and digitisation, the business model of exchanges has fundamentally changed and led to the emergence of global exchange groups that dominate the exchange industry (CME, ICE, LSE, Cboe, Nasdaq and Deutsche Börse). Thereby, exchanges transformed from national marketplaces to global providers of financial infrastructures. They control the infrastructures that enable the functioning of capital markets: from market data, indices, financial products, trading platforms to post-trading activities such as clearing, exchanges create the rules according to which market transactions take place. This provision of financial infrastructures enables them to shape capital markets and represents a source of structural power, as exchanges potentially influence the actions of companies, investors and states entangled with these infrastructures. By shedding light on exchanges and their changed role and activities within capital markets, this paper makes a case for including exchanges as powerful actors into IPE analyses of global finance and for more closely analysing the structural power of (financial) infrastructure providers in the global economy. KEYWORDS Structural power; financial infrastructures; global finance; stock exchange; capital markets We are of course known as a US exchange but that's a very small part of our business, only about 10% of our revenue. […] The major part of our business is what we today call FinTech. […] So, we provide infrastructure to the world's capital markets. We have more than 100 marketplaces around the world that are using our technology for their day-today trading, clearing, settlement, risk management. […] We sell market data in different shapes and forms from markets in Europe and the US, we do index business, licensing our indices to asset managers that provide ETF products, […] we participate in the big derivative markets … […] Today, we are truly a global and technology-focused company. (Senior manager, global exchange (Hong Kong, 5 July 2017)).

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

Abstract: His research focuses on financialization, monetary governance, and neoliberal public sector reform.

Cited by 51 publications

References 38 publications

The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power

The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power

Two Historicisms: Unpacking the Rules of Reproduction Debate

From National Marketplaces to Global Providers of Financial Infrastructures: Exchanges, Infrastructures and Structural Power in Global Finance

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