Drafts by Joel Rabinovich
PKES WORKING PAPER, 2024
Corporate financialization (CF) comprises a major subfield of financialization studies centered o... more Corporate financialization (CF) comprises a major subfield of financialization studies centered on the belief that significant changes in corporate governance and business models have been driven by financial imperatives, profoundly impacting investment habits, labor policies, organizational practices, and the distribution of revenues. Experiencing explosive growth in recent years, the field has become mired in conceptual ambiguity, mirroring problems with financialization studies as a whole. While seeking to restore some conceptual clarity and clearly delineate the boundaries of the concept, this paper attempts a comprehensive review of empirical work on CF. At the core of the field we identify four sub-fields, each addressing distinct aspects of the way business models have become financialized under the influence of shareholder value principles. Our dissection of the literature shows, however, that these theories mostly remain under substantiated. The connection of financialization strategies to key outcomes of interest, like declining investment and rising inequality, remains nebulous in most cases. Beyond this, we identify key weaknesses in the way shareholder value orientation-the causal lynch pin of CF accounts-has been theorized. The field as a whole has paid insufficient attention to the variegated and uneven nature of the shareholder revolution, which has prevented a single uniform set of governance principles from diffusing. The critique concludes with a call for caution and nuance in employing the corporate financialization framework, emphasizing its role as just one part of a multifaceted transformation within capitalism. Alongside it, other pivotal structural forces, such as intangibilization, monopolization, and globalization, demand equal attention. The overarching aim of this review is to urge greater clarity, conceptual discipline, and a holistic perspective in future investigations into the dynamics of financialized capitalism.
The growth in cash holdings by non-financial corporations in emerging economies in general and La... more The growth in cash holdings by non-financial corporations in emerging economies in general and Latin American in particular has received less attention compared to their peers from advanced economies. Taking into account that cash holdings contain not only cash but also short-term, interest-bearing assets, we test whether financial profitability measured by the weight of financial income over total revenues was one motive behind the increase in this type of financial asset as it is claimed in analyses of the financialisation of the firm. We use a panel of nonfinancial firms from Argentina, Brazil, Chile, Colombia, Mexico and Peru to test this hypothesis and find supporting evidence for the Brazilian case only.
Most empirical macroeconomic research limited to the period since World War II. This paper analys... more Most empirical macroeconomic research limited to the period since World War II. This paper analyses the effects of changes in income distribution and in private wealth on consumption and investment covering a period from as early as 1855 until 2010 for the UK, France, Germany and USA, based on the dataset of Piketty and Zucman (2014). We contribute to the post-Keynesian debate on the nature of demand regimes, mainstream analyses of wealth effects and the financialisation debate. We find that overall domestic demand has been wage-led in the USA, UK and Germany. Total investment responds positively to higher wage shares, which is driven by residential investment. For corporate investment alone, we find a negative relation. Wealth effects are found to be positive and significant for consumption in the USA and UK, but weaker in France and Germany. Investment is negatively affected by private wealth in the USA and the UK, but positively in France and Germany.
One aspect in which nonfinancial corporations are said to be financialised is that they emulate t... more One aspect in which nonfinancial corporations are said to be financialised is that they emulate the asset and income structure of financial corporations. This is what we call the financial rentieralization hypothesis. In this article we show that the evidence used to sustain it, in the US setting, has to be reconsidered. Our findings show that, contrary to the financial rentieralization hypothesis, financial income averages 2.5% of total income since the '80s while net financial profit gets more negative as percentage of total profit for nonfinancial corporations. In terms of assets, some of the alleged financial assets actually reflect other activities in which nonfinancial corporations have been increasingly engaging: internationalization of production, activities refocusing and M&As. Résumé: L'une des définitions de la financiarisation d'une société non financière est le fait qu'elle ac-quiert la structure de revenus et d'actifs des sociétés financières. C'est ce que nous appelons l'hypothèse de rentierisation financière. Dans cet article, nous montrons que les données à l'origine de cette hy-pothèse, dans le cas des Etats-Unis, doivent être reconsidérées. Nos résultats constatent que, contraire-ment à l'hypothèse de rentierisation financière, les revenus financiers représentent en moyenne 2,5% des revenus totaux depuis les années 1980, tandis que le profit financier net pèse négativement sur les profits totaux des sociétés non financières. En termes d'actifs, certains des actifs dits financiers sont en réalité issus d'autres activités dans lesquelles les sociétés non financières sont de plus en plus engagées : internationalisation de la production, recentrage sur des activités principales, fusions et acquisitions.
The financialisation of the nonfinancial corporation has drawn the attention of many scholars who... more The financialisation of the nonfinancial corporation has drawn the attention of many scholars who have identified two channels by which financialisation happens: a higher proportion of financial assets compared to nonfinancial ones and a higher amount of resources distributed to financial markets. One of the consequences of this is the decrease in investment. Parallel to financialisation, many nonfinancial corporations have also engaged in an internationalization of their productive activities, organizing them under global value chains. Surprisingly, the intersections between the literature on financialisation and the literature on global value chain are still underdeveloped, although, for example, offshoring may also explain the decrease in investment of nonfinancial firms. This paper fills this gap using panel regressions for U.S. nonfinancial corporations between 1995 and 2011. We find evidence that both offshoring and financialisation are determinants to the decrease in investment and that financialisation occurs mainly for firms belonging to high offshoring sectors.
El presente artículo analiza cómo una serie de grupos de capitales argentinos que a fines de la d... more El presente artículo analiza cómo una serie de grupos de capitales argentinos que a fines de la década del ´90 estaban por fuera de las 100 empresas de mayores ventas lograron importantes crecimientos de facturación en un contexto general signado por la extranjerazación de varios de los grupos de mayor tamaño. Más allá de la alta atención recibida por parte de la prensa no especializada, en especial por la vinculación de parte de estos grupos con el gobierno de turno, desde el ámbito académico no existen trabajos que analicen su crecimiento en forma exhaustiva. El objetivo de este artículo es dar cuenta de este fenómeno, identificando y analizando los vectores de crecimiento de los nuevos grupos.
Papers by Joel Rabinovich
Socio-Economic Review, 2024
This article investigates the changing financial behaviour of Brazilian and Turkish non-financial... more This article investigates the changing financial behaviour of Brazilian and Turkish non-financial corporations (NFCs) in the context of international financial subordination. Recent empirical evidence shows that emerging capitalist economies’ (ECEs) NFCs have increased their holdings of very short-term financial assets (mainly cash), whilst borrowing heavily from (international) financial markets and banks. Drawing on an extensive mixed-method study, we show that, instead of being paradoxical or driven by speculative carry trade operations, the ‘wasteful’ combination of holding very liquid and lower yielding assets while borrowing at higher costs (largely denominated in foreign currency) can be contextualized in the subordinate integration of ECEs firms into the global economy. Whereas cash holdings protect against macroeconomic uncertainty, ECEs firm borrowing is largely determined by international market conditions in the context of structural financing constraints. Moreover, our results show the dualistic and heterogenous nature of ECEs firm financial behaviour, which mirrors the polarity observed in those economies’ productive structure and structural balance of payments constraints: only firms with secure access to foreign exchange—either through exports or active internationalization—have the collateral to interact with global—dollar dominated—financial markets. Finally, our article points to the important, yet contradictory, role of the state in ECEs firm financial behaviour. In instances where foreign exchange generating activities in the private sector are not given, the state assumes a crucial role in enabling firms’ engagement with global financial markets; yet it is that same engagement, which—in the context of international financial subordination—creates acute macroeconomic vulnerabilities which at times force the state to restrict those same operations.
Social Science Research Network, 2022
Cambridge Journal of Economics, Feb 4, 2019
Competition and Change, Aug 8, 2022
Competition & Change
The increase in cash holdings held by non-financial corporations in emerging economies in general... more The increase in cash holdings held by non-financial corporations in emerging economies in general, and Latin American in particular, has received less attention vis-à-vis their advanced economies’ peers. Considering that cash holdings contain not only cash but also short-term, interest-bearing assets, we test whether the pursuit of financial revenues was one motive behind the decision to hold this type of asset as it is claimed in analyses of corporate financialization. We use a panel of listed non-financial firms from Argentina, Brazil, Chile, Mexico, and Peru between 1998 and 2018 to test this hypothesis. Although we find supporting statistical evidence in favor of this relation, this is mostly explained by Brazil and results point towards a low economic significance.
Structural Change and Economic Dynamics
HAL (Le Centre pour la Communication Scientifique Directe), Jun 27, 2019
This thesis studies the different strategies that have allowed listed non-financial corporations ... more This thesis studies the different strategies that have allowed listed non-financial corporations to remain profitable while investing less and increasingly distributing funds to shareholders under financialisation. This feeble link between profitability and investment is usually denominated as the profit-investment puzzle. Part 1 of this thesis locates historically and theoretically this puzzle. Whereas the financialisation literature has generally been limited to show the negative effects of the distribution of funds to share holders for capital expenditures, we show that the coexistence of high levels of profits (and payouts) with low levels of investment was possible due to the simultaneous engagement of these non-financial corporations in other activities. Part 2 examines one type of answer that we denominate the financial turn of accumulation. The solution to the puzzle in this case implies a shift in the activities of NFCs to financial accumulation and profits. However, throug...
RePEc: Research Papers in Economics, 2018
Research Papers in Economics, 2018
Research Papers in Economics, Dec 17, 2020
This paper argues that, as far as the investment behavior of non-financial corporations is concer... more This paper argues that, as far as the investment behavior of non-financial corporations is concerned, the apparent continuity over the last four decades suggested by the financialization label is misleading. Indeed, while the disconnection between profitability and investment is a robust stylized fact for most of the period, with cumulative detrimental consequences for labor, we contend that the underlying mechanisms changed meaningfully at the turn of the millennium. This contribution proposes to establish -empirically and theoretically- two distinctive successive financialization regimes (Mark I and Mark II) and to explain their evolutionary articulation. Financialization Mark I is characterized by the empowerment of financial actors: in a context of high-interest rates and full-blown liberalization, diminishing retained earnings by non-financial corporations resulted in a dramatic slowdown of investment with cascading negative effects for labor. Contrastingly, Financialization Mark II is characterized by a strongly established financial hegemony with new forms of intellectual and financial monopoly. In this configuration, interest rates are low and global value chains are deeply seated. This fuels rampant deflationary pressure, which changes the overall dynamic of the profit-investment nexus. Then, in Financialization Mark II, contrary to what occurred during Financialization Mark I, distributed profits are the consequence of slow investment
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Drafts by Joel Rabinovich
Papers by Joel Rabinovich