Financial systems, corporate control and capital accumulation

Bibliographic Data

ID2159264
AuthorsMichel Aglietta, Régis Breton
Year2001
Volume30
Issue4
Pages433-466
Publication date2001-01-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueEconomy and Society (JOURNAL)
Journal identifiersISSN: 0308-5147 • E-ISSN: 1469-5766
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/03085140120089054
OpenAlexW2138629135
LanguageEN
Citations received72

The rise of financial markets, backed by the revolution in information technology,has been one of the pillars of the new economy. Asset price inflation, financed by debt, has now become the driving force in capital accumulation and equity-linked markets for corporate control have significant effects on both corporate strategic management and the growth of the business sector. This paper develops a model to study these relationships. One component of the new circumstances is that an active market for control forces firms to boost their share price in response to the threat of take-over and, to maintain a minimum return on equity, they have to distribute dividends or buy back shares. As a consequence, the share of profits dedicated to financing internal growth is reduced, corporations increase their indebtedness and thereby become constrained by banks. The interplay of these multi-dimensional pressures delivers a straightforward, but nonetheless important lesson: everything else being equal, the more active the market for control, the lower the growth rate

Business · Capital market · Control (management · Corporate Finance · Corporate governance · Debt · Dividend · Economics · Equity (law · Financial system · Market economy · Market for corporate control · Monetary economics · Economic theories and models · Finance

Tools

Open DOISci-Hub