Globalization and technological development have been under intense scrutiny of academics, practitioners and the media. The impact of one of their outcomes, however, deserves further debate, in face of its ubiquitous presence on everyday life, but, mainly, because it still represents a considerable threat for world economy. We are talking about financialization that can be considered as a “new stage” of capitalism (Clark and Hebb, 2004).

In accordance with Epstein (2005, p. 3) “financialization means the increasing of financial motives, financial market, financial actor and financial institutions in the operation of domestic and international economies”. Despite it is not a brand new event in world´s history, it is undeniable that it gained extraordinary force after neo-liberal deregulation of the 1970´s (Krippner, 2004).

The study of financialization is of paramount importance, because it allows us to have a better understanding of the causes of contemporary crises and instabilities. By assessing the risks, actors and variables evolved in this process, it is possible to recommend mechanisms to prevent and strive future crunches.

Financialization is a complex subject with a bewildering variety of aspects one can analyze. At this opportunity, however, our objective is to focus our attention on a specific point: the finance conception of the firm and the impact of this new perspective on contemporary business environment, particularly on port industry. In order to enable our investigation, we are going to use cultural economy as our theoretical framework, complementing academic perspective with practical examples.

Theoretical Underpinning

 In the first place, as we are studying the finance concept of the firm and influence of shareholder´s demands into business, it is convenient to grasp how these two perspectives become predominant. We could use several frameworks to comprehend this process, but we believe that cultural economy is the most adequate, because it addresses, among other elements, to the power of discourse in economy. This critical perspective amplifies the mainstream debate that is usually focused on subjects like growth, accumulation and stability (Erturk et. al 2008, p. 239), but neglects the influence of human relations, particularly the cultural effect.

The “cultural turn” stemmed from the preoccupation of some academics to understand the contemporary economic scenario, which is extremely complex, dynamic and unstable.  The theories available up to that moment were not able to explain the origins and outcomes of those changes, demanding the incorporation of new variables in the research (Du Gay and Pryke, 2002).

Cultural economy brings, therefore, interesting insights about financialization and its consolidation. Callon (1998), for instance, argues that economics not simply describes economy, but performs it (Erturk et. al, 2008, p. 240). That means that these actors analyze problems, think about solutions and share their opinion as the truth or the natural and reasonable thing to do. In short, they construct reality.

In accordance with Erturk et al (2008, p. 241), cultural economy’s literature has different standpoints. All analysis, however, revolve about narratives and discourses.

With cultural economy framework in mind, we must gather explanations to understand why firms reduced the role of marketing and sales in order to prestige finance perspective. Fligstein (2008) has investigated this shift, identifying that the pioneers of these new strategies had finance and accounting backgrounds. The firm has passed to be viewed as a “collection of assets that could and should be manipulated to increase short-run profits” (Fligstein, 2008, p.314).

The author also presented three main conditions that made finance control possible: (1) diversification as a mechanism to enlarge companies and to obtain growth; (2) implementation of multi-product organizational structure, which became possible to one central office to control all of the firm based upon financial performance indexes; (3) introduction of antitrust policies, preventing vertical integration, but stimulating horizontal diversification through merging. As some of these initiatives achieved relatively success, large companies start to follow this model, transforming the trend into standard pattern.

Despite it is not the focus of our investigation, we must recall that another change in business thinking caused the narrowing of goals: the advent of shareholder´s value orientation, the “business cliché and social mantra of the 1990s” (Froud et al, 2010, p. 81).

The concern with shareholder value appeared in the 1980s as a consultancy product (Froud et al, 2010). Lazonick and O´Sullivan (2008, p. 321) explain that initially companies followed the principle of “retain and reinvest” to allow growth. The practice was to utilize earnings to purchase physical assets and resources.  During the 1960s, the surge of merger and acquisitions created new demands to the companies: the tactic used until that point was not adequate any more, since central offices were too far from production unit. Reinvestment decisions were, therefore, risky and unfeasible.

In addition to that, US observed, in the 1970s, a significant decrease in firm´s performance due to several reasons, including macroeconomic conjuncture and international competition. Aiming to solve these problems, American economists developed the agency theory. According to this school of thought, managers have their own concerns, setting up a personal agenda. Therefore, they might take management decisions that most benefit themselves instead of preserving shareholders´ interests. Company’s owners should, therefore, restore control. (Lazonick and O´Sullivan, 2008, p. 322). Since then, shareholder value has been guiding corporate goals.

As we can see, two elements have contributed to a new management perspective: the dissemination of the agency theory assumptions and the hegemony of finance over production and marketing. These ideas became, to some extent, “law” in business environment, affecting level of production, efficiency and innovation. Analyzing the aforementioned phenomena using cultural economy´s lenses we can verify that discourse was fundamental in both situations. Great success histories have been told by media and confirmed by consultants and award-winning professionals.

In the next topic, we will put these findings into context, discussing about financialization of port industry. Finally, we are going to conclude the study by offering a brief critical analysis and some practical recommendations.


The research undertaken by Rodrigue, Noteboom and Pallis (2011) help us to assess the impact of financialization on port industry. The authors show that, historically, maritime and finance sector have always been close to each other (e.g. creation of insurance industry and the first forms of hedges). Maritime and port executives, with a technical background, however, used to control management in these firms, since they had the necessary knowledge to take decisions about investments. Finance sector provided funds to enable terminal construction based upon a relationship of merit and trust. (Rodrigue, Noteboom and Pallis, 2011, p. 195).

Since terminal assets could be used as col-laterals for capital investment, market perceived port industry as a good investment option, with low risks (since assets can be sell to another investor) and high returns (Rodrigue, Noteboom and Pallis, 2011, p. 195). In face of the presented situation, market raised its expectations and optimism took control of port industry. The increasing attention to these type of installations is clear:  up to 1980s, several ports fought against deficit of supply, but after finances booming the scenario has radically changed, with the building of innumerous new terminals and expansion of the existents, mainly in the east. The control of enterprises, which used to belong to technical executives, has passed to finance actors. The wave of mergers has also hit the sector, as we can observe in the figure below (Van de Voorde and Vanelslander, 2008):

Figure 1 – Mergers and Take overs between terminal operating companies

Source: Van de Voorde and Vanelslander (2008)

The consequences of this new model are (1) bigger participation of “financial speculators, venture capitalists and pension funds with no or little knowledge of the terminal operating business” (Rodrigue, Noteboom and Pallis, 2011, p. 199); (2) higher leaning and tolerance to risk, considered natural in finance sector (3) establishment of a “bonuses culture” from the moment that port and terminal companies joined stock market; (4) increase in the number of international players that has no commitment to local development. (Rodrigue, Noteboom and Pallis, 2011, p. 201)

As a result of this financial deployment, terminals tend to assume risker positions, focus on short-term results and neglected operational considerations. This situation confirms the view of Fligstein (2008):

“The product mix of firms is less important in the finance conception because each of the firm’s business are no longer product lines, but profit centers. Since the goal is to increase assets and profits, the organizational fields of the finance driven firms are no longer industrial based” (Fligstein, 2008, p. 311)

These effects, however, are even more critical at port sector due to the dissociation from industry and the lack of knowledge of its particularities. Considering extremely optimistic forecasts and advices, some investors have overestimated the value of port facilities. In their projections, they did not foresee delays, market downturns, political influences and regulatory risks, leading to low performance and returns.

Rodrigue, Noteboom and Pallis (2011) claim that after 2008 crisis, government and Port Authorities started to change its position towards investors in order to prevent the sector from eventual bailouts, as in many regions, port terminals are considered too-big-to-fail, besides representing important underlying for national economies. Towards this menace, they started to new use mechanisms to assess risk.

We can identify this trend in Brazilian port scenario. Maritime Regulatory Agency has designed new rules for port enterprises, stablishing strict norms. The technique employed to measure economic feasibility is valuation, particularly, the calculation of Net Present Value (NPV). Nevertheless, interestingly, even this alternative is in line with financialization movement, as we can see in the work endeavored by Chiappello (2015). The author discusses the financialization of accounting techniques to set value and criticizes the methods, arguing that they pretend do   “price the priceless”.


Financialization has brought undeniable development to world economy: the great availability of money enabled the outset of new enterprises, generating jobs, providing infrastructure for the market and better quality of life for some households. Nevertheless, this process, that has also augmented instabilities, did not allowed the decrease of social inequalities or stimulated production.

The commitment to shareholder´s value made executives focus their efforts on short-term actions, which resulted in profitable financial outcomes for companies´ owners (e.g. increase in share value and payment of dividends). On the other hand, innumerous aspects of business management were forgotten. Innovation, for instance, was set aside, as it usually demands high investments (representing, even, sunk costs) and requires longer payback.

The assimilation of this shortsighted business philosophy by executives was possible due to the systematic sharing of elite’s discourse, supported by consultants, financial advisors, specialized media, etc (Froud et al, 2010). The outcomes of this dynamic are present all over the market.

At this opportunity, we have demonstrated the effects of financialization on port industry. Traditionally based upon technical decisions, the sector has been stricken by a surge of optimism in face of the “low risk” of investment. As shown before, the discourse emphasized the high favorability of the market: predictable revenues, intense international trade and high volumes of profit. Reality, however, showed to be far from the promises: several terminals, highly valued at the time of acquisition, presented low performance levels or required a longer period to amortize their investments, than it was expected.

Fearing bad results and the imminence of bailouts, government and regulatory agencies increased requirements to permit the setting up of new terminals, utilizing accounting techniques broadly employed in the market to make forecasts (e.g. valuation). Nevertheless, literature pointed that the process of financialization also influences these “neutral” mechanisms (Chiapello, 2015).

In these terms, we highlight the necessity of better assessment of risks, whatever in port industry or any other business, warning to the importance of long-term planning, innovation and focus on technical knowledge.


Chiapello, E. (2015) ‘Financialisation of Valuation’, Human Studies, 38 (1), pp.13–35.

Clark, G. L. and Hebb, T., (2004) ‘Pension fund corporate engagement: The fifth stage of capitalism’. Industrial Relations, 59, 142–171.

Du Gay, P. and Pryke, M., (Eds.) (2002).  Cultural Economy: Cultural Analysis and Commercial Life. London: Sage

Epstein, G. (ed.) (2005) Financialization and the World Economy. Edward Elgar: Aldershot.

Erturk, K. et al. (2008) Financialization at Work. New York: Routledge.

Fligstein, N. (2008) ‘The Finance Conception of the Firm’ in Erturk, K. et al. (eds.) Financialization at Work. New York: Routledge, pp. 307-318

Froud, J. et al. (2000) ‘Shareholder value and Financialization: consultancy promises, management moves’ Economy and Society, 29(1), pp.80–110.

Krippner, G., (2005) ‘The Financialization of the American Economy’. Socio-economic Review, 3(2), pp.173–208.

Lazonick, W. and O´Sullivan, M. (2008) “Shareholder value and Corporate Governance” in Erturk, K. et al. (eds.) Financialization at Work. New York: Routledge, pp. 307-318.

Rodrigue, J. P., Notteboom, T. and Pallis, A., (2011). The financialization of the port and terminal industry: revisiting risk and embeddedness. Maritime Policy & Management, 38(2), pp.191–213.

Van der Voorde, E. and Valnelslander, T. (2008) Market Power and Vertical and Horizontal Integration in the Maritime Shipping and Port Industry. Discussion paper (2) Antwerp: University of Antwerp.

No. Documento


Elaborado por

Fernanda Rumblesperger