Financialization of Non-Financial Companies

LIMESplus

1

35

60

1820-0869

https://www.ceeol.com/search/article-detail?id=475692

2016-2021/10/18/12:05:58

Summary/Abstract: While financialization is recognized as one of the major transformation of our capitalist economies in the last three decades, research on the topic has primarily focused on its socio-political dimensions and its macro-economic and distributional effects: increase of the “rentier” share to the detriment of thewage share, reduction in accumulation and growth, instability, inequalities, among other. Firm-level analyses, although in our view key to the question, have so far received limited attention and proper firm-level empirical studies remain partial and insufficiently developed. In this paper, we investigate and characterize the financialization of a major non-financial sector based on firm-level data analysis, by studying the transformation of the automotive sector over the last 15 years. The financial distress of the giants of the sector – including the bankruptcy of GM – has led to sometimes undisputed public buyout, justified mainly by a “too-big-too-fail” motive. Yet, the link between the sector difficulty and the 2008 financial crisis has so far failed to be questioned. We test, in this paper, the hypothesis that the financialization of car manufacturing industry would have played a significant role in the sector’s crisis since then. We build an original data base from individual financial reports of the majors of the sector and analyze the financial data of individual companies on the 2000–2015 period. Balance sheet and cash flow analysis confirms a tremendous trend towards a financialization of the sector as a whole, especially after 2005. Following Minsky, we also test the robustness of the balance sheet regarding his hedge/speculative and Ponzi finance criteria. This leads us to qualify the sector as a whole as a financialized industry facing high financial fragility of a specific form. This leads us to recommendations towards the sector and in terms of economic policy.

automobile sector, car manufacturers, Financialization, non-financial corporations