1932

Abstract

Financialization refers to the increasing importance of finance, financial markets, and financial institutions to the workings of the economy. This article reviews evidence on the causes and consequences of financialization in the United States and around the world, with particular attention to the spread of financial markets. Researchers have focused on two broad themes at the level of corporations and broader societies. First, an orientation toward shareholder value has led to substantial changes in corporate strategies and structures that have encouraged outsourcing and corporate disaggregation while increasing compensation at the top. Second, financialization has shaped patterns of inequality, culture, and social change in the broader society. Underlying these changes is a broad shift in how capital is intermediated, from financial institutions to financial markets, through mechanisms such as securitization (turning debts into marketable securities). Enabled by a combination of theory, technology, and ideology, financialization is a potent force for changing social institutions.

Loading

Article metrics loading...

/content/journals/10.1146/annurev-soc-073014-112402
2015-08-14
2024-03-29
Loading full text...

Full text loading...

/deliver/fulltext/soc/41/1/annurev-soc-073014-112402.html?itemId=/content/journals/10.1146/annurev-soc-073014-112402&mimeType=html&fmt=ahah

Literature Cited

  1. Aitken R. 2007. Performing Capital: Toward a Cultural Economy of Popular and Global Finance New York: Palgrave Macmillan
  2. Amable B. 2003. The Diversity of Modern Capitalism Oxford, UK: Oxford Univ. Press
  3. Arrighi G. 2010. The Long Twentieth Century: Money, Power, and the Origins of Our Times London: Verso
  4. Babb S. 2005. The rise of the new money doctors in Mexico. See Epstein 2005 243–59
  5. Bebchuk L, Grinstein Y. 2005. The growth of executive pay. Oxf. Rev. Econ. Policy 21:283–303 [Google Scholar]
  6. Block F. 2014. Democratizing finance. Polit. Soc. 42:3–28 [Google Scholar]
  7. Briscoe F, Murphy C. 2012. Sleight of hand? Practice opacity, third-party responses, and the interorganizational diffusion of controversial practices. Adm. Sci. Q. 57:553–84 [Google Scholar]
  8. Callon M. 1998. Introduction: the embeddedness of economic markets in economics. Sociol. Rev. 46:1–57 [Google Scholar]
  9. Carruthers BG. 1996. City of Capital: Politics and Markets in the English Financial Revolution Princeton, NJ: Princeton Univ. Press
  10. Carruthers BG, Ariovich L. 2010. Money and Credit: A Sociological Approach Cambridge, UK: Polity
  11. Carruthers BG, Kim J-C. 2011. The sociology of finance. Annu. Rev. Sociol. 37:239–59 [Google Scholar]
  12. Chan S. 2013. ‘I am King’: financialisation and the paradox of precarious work. Econ. Labor Relat. Rev. 24:362–79 [Google Scholar]
  13. Chu JSG, Davis GF. 2013. Who killed the inner circle? The collapse of the American corporate interlock network Work. Pap. Univ. Mich. Ann Arbor, MI. http://ssrn.com/abstract=2061113
  14. Cobb JA. 2012. From the ‘Treaty of Detroit’ to the 401(k): The Development and Evolution of Privatized Retirement in the United States Ann Arbor, MI: Univ. Mich. Press [Google Scholar]
  15. Coffee JC Jr. 1998. Future as history: the prospects for global convergence in corporate governance and its implications. Northwest. Univ. Law Rev. 93:641–707 [Google Scholar]
  16. Cotton-Nessler NC, Davis GF. 2012. Stock ownership, political beliefs, and party identification from the “ownership society” to the financial meltdown. Account. Econ. Law 2:2 [Google Scholar]
  17. Crotty J. 2003. The neoliberal paradox: the impact of destructive product market competition and impatient finance on nonfinancial corporations in the neoliberal era. Rev. Radic. Polit. Econ. 35:271–79 [Google Scholar]
  18. Crotty J, Lee K-K. 2005. The causes and consequences of neoliberal restructuring in post-crisis Korea. See Epstein 2005 334–48
  19. Davis GF. 2005. New directions in corporate governance. Annu. Rev. Sociol. 31:143–62 [Google Scholar]
  20. Davis GF. 2008. A new finance capitalism? Mutual funds and ownership re-concentration in the United States. Eur. Manag. Rev. 5:11–21 [Google Scholar]
  21. Davis GF. 2009. Managed by the Markets: How Finance Reshaped America Oxford, UK: Oxford Univ. Press
  22. Davis GF. 2010. After the ownership society: Another world is possible. Res. Sociol. Organ. 30B:331–56 [Google Scholar]
  23. Davis GF. 2013. After the corporation. Polit. Soc. 41:283–308 [Google Scholar]
  24. Davis GF, Diekmann KA, Tinsley CH. 1994. The decline and fall of the conglomerate firm in the 1980s: the deinstitutionalization of an organizational form. Am. Sociol. Rev. 59:547–70 [Google Scholar]
  25. Davis GF, Mizruchi MS. 1999. The money center cannot hold: commercial banks in the U.S. system of corporate governance. Adm. Sci. Q. 44:215–39 [Google Scholar]
  26. Davis GF, Robbins G. 2005. Nothing but net? Networks and status in corporate governance. The Sociology of Financial Markets K Knorr-Cetina, A Preda 290–311 Oxford, UK: Oxford Univ. Press [Google Scholar]
  27. Davis GF, Stout SK. 1992. Organization theory and the market for corporate control: a dynamic analysis of the characteristics of large takeover targets, 1980–1990. Adm. Sci. Q. 37:605–33 [Google Scholar]
  28. Davis GF, Thompson TA. 1994. A social movement perspective on corporate control. Adm. Sci. Q. 39:141–73 [Google Scholar]
  29. DiPrete TA, Eirich GM, Pittinsky M. 2010. Compensation benchmarking, leapfrogs, and the surge in executive pay. Am. J. Sociol. 115:1671–712 [Google Scholar]
  30. Dixon AD, Sorsa V-P. 2009. Institutional change and the financialisation of pensions in Europe. Compet. Change 13:347–67 [Google Scholar]
  31. Dobbin F, Jung J. 2010. The misapplication of Mr. Michael Jensen: how agency theory brought down the economy and why it might again. Res. Sociol. Organ. 30:29–64 [Google Scholar]
  32. Drori I, Ellis S, Shapira Z. 2013. The Evolution of a New Industry: A Genealogical Approach Stanford, CA: Stanford Univ. Press
  33. Dynan KE. 2009. Changing household financial opportunities and economic security. J. Econ. Perspect. 23:49–68 [Google Scholar]
  34. Englander E, Kaufman A. 2004. The end of managerial ideology: from corporate social responsibility to corporate social indifference. Enterprise Soc. 5:404–50 [Google Scholar]
  35. Epstein GA. 2005. Financialization and the World Economy Cheltenham, UK: Edward Elgar
  36. Fama EF, Jensen MC. 1983. Separation of ownership and control. J. Law Econ. 26:301–25 [Google Scholar]
  37. Fields DJ. 2013. From property abandonment to predatory equity: writings on financialization and urban space in New York City PhD Diss. CUNY, New York
  38. Fligstein N. 1990. The Transformation of Corporate Control Cambridge, MA: Harvard Univ. Press
  39. Fligstein N, Goldstein A. 2015. The emergence of a finance culture in American households, 1989–2007. Socioecon. Rev. doi: 10.1093/ser/mwu035
  40. Fligstein N, Shin T. 2007. Shareholder value and the transformation of the U.S. economy, 1984–2001. Sociol. Forum 22:399–424 [Google Scholar]
  41. Foster JB. 2007. The financialization of capitalism. Mon. Rev. 58:1–14 [Google Scholar]
  42. French S, Kneale J. 2012. Speculating on careless lives. J. Cult. Econ. 5:391–406 [Google Scholar]
  43. Froud J, Sukhdev J, Leaver A, Williams K. 2006. Financialization and Strategy: Narrative and Numbers New York: Routledge
  44. Gunnoe A. 2014. The political economy of institutional landownership: neorentier society and the financialization of land. Rural Sociol. 79:478–504 [Google Scholar]
  45. Guseva A, Rona-Tas A. 2001. Uncertainty, risk, and trust: Russian and American credit card markets compared. Am. Sociol. Rev. 66:623–46 [Google Scholar]
  46. Hacker JS. 2004. Privatizing risk without privatizing the welfare state: the hidden politics of social policy retrenchment in the United States. Am. Polit. Sci. Rev. 98:243–60 [Google Scholar]
  47. Hacker JS. 2006. The Great Risk Shift: The Assault on American Jobs, Families, Health Care and Retirement and How You Can Fight Back New York: Oxford Univ. Press
  48. Hall PA, Soskice DW. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage Oxford, UK: Oxford Univ. Press
  49. Harris A, Evans H, Beckett K. 2010. Drawing blood from stones: legal debt and social inequality in the contemporary United States. Am. J. Sociol. 115:1753–99 [Google Scholar]
  50. Hiss S. 2013. The politics of the financialization of sustainability. Compet. Change 17:234–47 [Google Scholar]
  51. Hodson R, Dwyer RE, Neilson LA. 2014. Credit card blues: the middle class and the hidden costs of easy credit. Sociol. Q. 55:315–40 [Google Scholar]
  52. Hyman L. 2008. Debtor nation: how consumer credit built postwar America. Enterprise Soc. 9:614–18 [Google Scholar]
  53. Jacoby S. 2008. Finance and labor: perspectives on risk, inequality, and democracy. Comp. Labor Law Policy J. 30:17–65 [Google Scholar]
  54. Jensen MC. 2002. Value maximization, stakeholder theory, and the corporate objective function. Bus. Ethics Q. 12:235–56 [Google Scholar]
  55. Kaplan SN, Rauh J. 2010. Wall Street and Main Street: What contributes to the rise in the highest incomes?. Rev. Financ. Stud. 23:1004–50 [Google Scholar]
  56. Keister LA. 2005. Getting Rich: America's New Rich and How They Got That Way New York: Cambridge Univ. Press
  57. Kogut B. 2012. The Small Worlds of Corporate Governance Cambridge, MA: MIT Press
  58. Krippner GR. 2005. The financialization of the American economy. Socioecon. Rev. 3:173–208 [Google Scholar]
  59. Krippner GR. 2011. Capitalizing on Crisis Cambridge, MA: Harvard Univ. Press
  60. Kruse DL, Freeman RB, Blasi JR. 2010. Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-Based Stock Options Chicago: Univ. Chicago Press
  61. Porta R, López-de-Silanes F, Shleifer A. La 2008. The economic consequences of legal origins. J. Econ. Lit. 46:285–332 [Google Scholar]
  62. Lazonick W, O'Sullivan M. 2000. Maximizing shareholder value: a new ideology for corporate governance. Econ. Soc. 29:13–35 [Google Scholar]
  63. LeBaron G, Roberts A. 2012. Confining social insecurity: neoliberalism and the rise of the 21st century debtors' prison. Polit. Gender 8:25–49 [Google Scholar]
  64. Lin K-H, Tomaskovic-Devey D. 2013. Financialization and US income inequality, 1970–2008. Am. J. Sociol. 118:1284–329 [Google Scholar]
  65. MacKenzie DA, Millo Y. 2003. Constructing a market, performing theory: the historical sociology of a financial derivatives exchange. Am. J. Sociol. 109:107–45 [Google Scholar]
  66. MacKenzie DA, Muniesa F, Siu L. 2007. Do Economists Make Markets? On the Performativity of Economics Princeton, NJ: Princeton Univ. Press
  67. Manne HG. 1965. Mergers and the market for corporate control. J. Polit. Econ. 73:110–20 [Google Scholar]
  68. Martin R. 2002. Financialization of Daily Life Philadelphia: Temple Univ. Press
  69. Mintz BA, Schwartz M. 1985. The Power Structure of American Business Chicago: Univ. Chicago Press
  70. Mizruchi MS. 2013. The Fracturing of the American Corporate Elite Cambridge, MA: Harvard Univ. Press
  71. Nau M. 2013. Economic elites, investments, and income inequality. Social Forces 92:437–61 [Google Scholar]
  72. North DC. 1990. Institutions, Institutional Change and Economic Performance Cambridge, UK: Cambridge Univ. Press
  73. North DC, Weingast BR. 1989. Constitutions and commitment: the evolution of institutions governing public choice in seventeenth-century England. J. Econ. Hist. 49:803–32 [Google Scholar]
  74. Pacewicz J. 2012. Tax increment financing, economic development professionals and the financialization of urban politics. Socioecon. Rev. 2012:1–28 [Google Scholar]
  75. Philippon T, Reshef A. 2013. An international look at the growth of modern finance. J. Econ. Perspect. 27:73–96 [Google Scholar]
  76. Polillo S, Guillén MF. 2005. Globalization pressures and the state: the worldwide spread of central bank independence. Am. J. Sociol. 110:1764–802 [Google Scholar]
  77. Quinn S. 2008. The transformation of morals in markets: death, benefits, and the exchange of life insurance policies. Am. J. Sociol. 114:738–80 [Google Scholar]
  78. Rao H, Sivakumar K. 1999. Institutional sources of boundary-spanning structures: the establishment of investor relations departments in the fortune 500 industrials. Organ. Sci. 10:27–42 [Google Scholar]
  79. Rona-Tas A, Hiss S. 2010. The role of ratings in the subprime mortgage crisis: the art of corporate and the science of consumer credit rating. Res. Sociol. Organ. 30:115–55 [Google Scholar]
  80. Schneiberg M. 2011. Toward an organizationally diverse American capitalism? Cooperative, mutual, and local, state-owned enterprise. Seattle Univ. Law Rev. 34:1409–34 [Google Scholar]
  81. Soule SA. 2009. Contention and Corporate Social Responsibility Cambridge, UK: Cambridge Univ. Press
  82. Sparkes R, Cowton CJ. 2004. The maturing of socially responsible investment: a review of the developing link with corporate social responsibility. J. Bus. Ethics 52:45–57 [Google Scholar]
  83. Stockhammer E. 2004. Financialisation and the slowdown of accumulation. Camb. J. Econ. 28:719–41 [Google Scholar]
  84. Streeck W. 2011. Taking capitalism seriously: towards an institutionalist approach to contemporary political economy. Socioecon. Rev. 9:137–67 [Google Scholar]
  85. Sum A, Tobar P, McLaughlin J, Palma S. 2008. The great divergence: real-wage growth of all workers versus finance workers. Challenge 51:57–79 [Google Scholar]
  86. Sweezy P, Magdoff H. 1987. Stagnation and the Financial Explosion New York: Monthly Review
  87. Tomaskovic-Devey D, Lin K-H. 2011. Income dynamics, economic rents, and the financialization of the U.S. economy. Am. Sociol. Rev. 76:538–59 [Google Scholar]
  88. Tregenna F. 2009. The fat years: the structure and profitability of the US banking sector in the pre-crisis period. Camb. J. Econ. 33:609–32 [Google Scholar]
  89. Trumbull G. 2012. Credit access and social welfare: the rise of consumer lending in the United States and France. Polit. Soc. 40:9–34 [Google Scholar]
  90. Useem M. 1996. Investor Capitalism: How Money Managers Are Changing the Face of Corporate America New York: Basic Books
  91. Useem M. 1998. Corporate leadership in a globalizing equity market. Acad. Manag. Executive 12:43–59 [Google Scholar]
  92. van der Zwan N. 2014. Making sense of financialization. Socioecon. Rev. 12:99–129 [Google Scholar]
  93. Volscho TW, Kelly NJ. 2012. The rise of the super-rich: power resources, taxes, financial markets, and the dynamics of the top 1 percent, 1949 to 2008. Am. Sociol. Rev. 77:679–99 [Google Scholar]
  94. Weber K, Davis GF, Lounsbury M. 2009. Policy as myth and ceremony? The global spread of stock exchanges, 1980–2005. Acad. Manag. J. 52:1319–47 [Google Scholar]
  95. Weber R. 2010. Selling city futures: the financialization of urban redevelopment policy. Econ. Geogr. 86:251–74 [Google Scholar]
  96. Westphal JD, Zajac EJ. 1998. The symbolic management of stockholders: corporate governance reforms and shareholder reactions. Adm. Sci. Q. 43:127–53 [Google Scholar]
  97. Woo MJ-E. 2007. After the miracle: neoliberalism and institutional reform in East Asia. After the Miracle: Neoliberalism and Institutional Reform in East Asia MJ-E Woo 1–31 New York: Palgrave [Google Scholar]
  98. Zajac EJ, Westphal JD. 1995. Accounting for the explanations of CEO compensation: substance and symbolism. Adm. Sci. Q. 40:283–308 [Google Scholar]
  99. Zalewski DA, Whalen CJ. 2010. Financialization and income inequality: a post Keynesian institutionalist analysis. J. Econ. Issues 44:757–77 [Google Scholar]
  100. Zorn DM. 2004. Here a chief, there a chief: the rise of the CFO in the American firm. Am. Sociol. Rev. 69:345–64 [Google Scholar]
  101. Zuckerman EW. 1999. The categorical imperative: securities analysts and the illegitimacy discount. Am. J. Sociol. 104:1398–438 [Google Scholar]
  102. Zysman J. 1984. Governments, Markets, and Growth: Financial Systems and the Politics of Industrial Change. Ithaca, NY: Cornell Univ. Press [Google Scholar]
/content/journals/10.1146/annurev-soc-073014-112402
Loading
  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error