Financialisation and Short-Termism

Abstract

This chapter examines the rise of financialisation and its role in producing corporate short-termism in contemporary capitalism. It focuses on the financialisation of non-financial corporations, defining short-termism as excessive shareholder payouts that undermine long-term investment, employment security, and productive capacity. Drawing primarily on the United States as the archetype of financialised capitalism, the chapter traces the historical shift from post-war managerial capitalism to a shareholder value–oriented model centred on “shareholder value”. It distinguishes between profit financialisation and control financialisation and shows how both processes redirect corporate resources away from production and towards shareholder enrichment. The chapter documents the growth of dividends and share buybacks and examines their relationship to declining real investment, rising corporate debt, and organisational downsizing. It also analyses the role of hostile takeovers and managerial incentives in entrenching short-termist practices. The chapter situates these developments within a longer historical perspective to show that financialisation represents an institutionalised transformation rather than a temporary deviation. It concludes by arguing that while the stock market is central to short-termism, it is not sufficient on its own, pointing to the need for institutional and ideational analysis developed in the following chapters.