The Functions of the Stock Market and the Fallacies of Shareholder Value
Abstract
This chapter analyses the evolution of US stock markets in terms of five functions: ‘control’, ‘cash’, ‘creation’, ‘combination’, and ‘compensation’. I argue for the centrality of the control function in supporting innovative enterprise in the rise of US managerial capitalism. I then consider how each of the five functions can encourage value creation or, alternatively, empower value extraction, and trace the evolving roles of the five functions of the stock market in major US business corporations over the past century. Drawing upon this history, I conclude by critiquing the dominant ideology that, for the sake of superior economic performance, a company should be run to ‘maximize shareholder value’ (MSV). I indicate how MSV undermines the social conditions of innovative enterprise: strategic control, organizational integration, and financial commitment.
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In the USA, over the decade 2006-17, net equity issues of non-financial corporations averaged -$412 billion per year, meaning more money has gone into the stock market than been taken out.
“In the USA for example, over the decade 2006-17 net equity issues of non-financial corporations averaged -$412 billion per year (Lazonick, 2018), meaning more money has gone into the stock market than been taken out.”
From Mapping modern economic rents: the good, the bad, and the grey areas (2023) · cites this paper as Lazonick, 2018
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Mapping modern economic rents: the good, the bad, and the grey areas
Mazzucato, M., Ryan-Collins, J., & Gouzoulis, G. (2023) · Cambridge Journal of Economics · doi:10.1093/cje/bead013 · Cited by 54 · see citing works
- Authors
- Lazonick, W.
- Corresponding author
- Lazonick, William
- ORCID
- Lazonick, William
- Venue
- Oxford Scholarship Online
- Publisher
- Oxford University Press
- Published
- 2018-07-19
- OpenAlex
- W2738544466
- Cited by
- 29
- References
- 0
- Citations by year
- 2026: 1 · 2024: 3 · 2023: 4 · 2022: 3 · 2021: 7 · 2020: 3 · 2019: 4 · 2018: 3 · 2017: 1
- FWCI
- 11.91
- Type
- book
- Language
- en
- Open access
- closed
- Locations
- Oxford University Press eBooks (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Social Sciences › Economics, Econometrics and Finance › Finance › Housing, Finance, and Neoliberalism
- Social Sciences › Business, Management and Accounting › Strategy and Management › Financial Reporting and Valuation Research
- Keywords
- shareholder wealth maximization, managerial capitalism, corporate control, value creation, value extraction, innovative firms, corporate governance, organizational integration, financial commitments, corporate compensation
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