Changes in the portfolio and financing behavior of nonfinancial corporations (NFCs) over the post-1970 period in the U.S. economy point to the financialization of the NFC and raise the question of accompanying changes in fixed investment behavior. Using a firm-level panel, this article econometrically investigates the relationship between financialization and investment, exploring the implications of changes in financing behavior, increasingly entrenched shareholder value norms and rising firm-level demand volatility for NFC investment in the U.S. economy between 1971 and 2013. Shareholder value orientation is, in particular, identified as a characteristic of the post-1970 U.S. economy associated with a statistically and economically significant decline in NFC investment rates. The stock of financial assets, conversely, is found to be a positive correlate of firm investment. The analysis also highlights key differences by firm size. In particular, shareholder value norms are found to primarily influence the investment behavior of large NFCs, while rising volatility most substantially impacts small firms. | IN TRO DUCT IO NThe increasingly dominant role of finance over the post-1970 period in the U.S. has, in recent years, led to a growing literature on financialization. While the precise concept of financialization varies considerably across analyses, the shared premise is that financial sector growth signifies an important structural change in the U.S. economy, highlighted by sustained growth in the share of financial profits in total corporate profits (Krippner, 2012). With respect to non-financial business, financialization is manifested in an increasingly complex relationship between non-financial corporations (NFCs) and the financial sector. As many large NFCs increasingly resemble financial companies, the hostile takeover movement and the emergence of shareholder value ideology point to changes in corporate governance 270 |

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An expanding literature analyses the implications of the post‐1980 expansion of finance in advanced economies – a process summarized as ‘financialization’ – for capital accumulation. This paper surveys the empirical literature on financialization and investment to take stock of where we are and to identify questions for further research. Because ‘financialization’ is widely recognized to be ambiguously defined, I first introduce empirical indicators of financialization in this literature. This categorization elucidates three approaches to measuring financialization in the context of investment. The first two approaches emphasize rising income flows between nonfinancial corporations (NFCs) and finance: first, growth in NFCs’ financial incomes and, second, growth in NFCs’ payments to creditors and shareholders. Rising financial profits are, notably, widely used to suggest financial assets and incomes ‘crowd out’ physical investment. I contend that these flow‐based indicators of financialization capture important relationships between changes in firm financial behaviour and investment, but also raise questions about determinants underlying NFCs’ changing portfolio and financing decisions. The third approach to defining financialization emphasizes the best‐developed behavioural explanation linking financialization to reduced investment: shareholder value orientation. In future research, scope remains for further attention to behavioural drivers of the empirical trends summarizing financialization.

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