Financialization of the Economy

Posted: 21 Aug 2015

See all articles by Gerald F. Davis

Gerald F. Davis

University of Michigan, Stephen M. Ross School of Business

Suntae Kim

Johns Hopkins Carey Business School

Date Written: August 2015


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.

Suggested Citation

Davis, Gerald F. and Kim, Suntae, Financialization of the Economy (August 2015). Annual Review of Sociology, Vol. 41, pp. 203-221, 2015, Available at SSRN: or

Gerald F. Davis (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States
734-647-4737 (Phone)
734-936-0282 (Fax)

Suntae Kim

Johns Hopkins Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics