Financialization and corporate restructuring: A quantitative assessment

The reorientation of corporate strategy under financialization was famously described by Lazonick and O’Sullivan (2000) as a two-sided effort of “downsize and distribute,” acknowledging an ad intra dimension (re-dimensioning of corporate perimeters) and an ad extra dimension (greater distribution of funds to investors). Since then, however, most empirical research in the literature on financialization has focused on analyzing the second of these dimensions. Our work attempts to shed light on the ad intra dimension, by empirically analyzing the link between corporate restructuring and financialization. To this end, we study the relation between corporate segmentation and shareholder-value orientation at the firm-level using a sample of over 8000 firms from OECD countries. Our results show that shareholder-value orientation, represented by a higher dividend payout ratio and a larger percentage of shares owned by institutional investors, contributes to a greater segmentation of the firm into multiple corporate assets (subsidiaries). Furthermore, this relation is stronger in regions where financialization is more extended (particularly the United States).