The financialisation of nonfinancial corporations: a comparison between Brazil and Turkey using sectoral data

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Existing literature discusses the potential drivers and impacts of financialisation, however, so far, little attention has been paid to how the nature of the underlying operations of nonfinancial corporations (NFCs), that is, their ‘productive’ relations, has influenced their likelihood to financialise.  

Addressing this gap is important for a better understanding of the relationship between finance and the ‘real’ economy and hence the inter-relation between financialisation and the structure of capital accumulation.  

This project addresses this gap by undertaking a systematic analysis of NFC financialisation in Brazil and Turkey at the sectoral level based on extensive balance sheet analyses and semi-structured interviews. The analysis not only sheds light on the roots of the financialisation process and provides insights into the dynamics and forms finance presents depending on the context under consideration, but also points to the complex functions and dysfunctions finance poses for capital accumulation. 


To fully understand why firms financialise and how sectoral context matters, this project assesses the changing financial practices of NFCs across different sectors in two key developing and emerging economies (DEEs): Brazil and Turkey.  

Brazil and Turkey are worth considering because they are cited among the most fragile economies of the world in the recent past due to heavy indebtedness of their NFCs (IMF,2015). The detailed case studies are based on an innovative mixed-method study, triangulating insights from the analysis of NFCs’ balance sheets with semi-structured interviews with NFCs, both in Brazil and Turkey, and one major offshore financial centre: London. Whereas the quantitative data allow us to document and trace existing financialisation phenomena and their sectoral variegation, the interviews aim at uncovering the variegated processes and structures which have shaped NFCs’ changing relations with financial markets uncovered in the balance sheet analysis. They allow insights into the sectorally distinct processes which might give rise to firm financialisation in DEEs. Moreover, the interviews give insight into the causality between NFCs’ financial and real sector decision-making. They capture ex-ante expectations and plans which might not necessarily be reflected in the data. More generally, the analysis will also help shedding light onto the distinct nature of financialisation in DEEs and its geographical variation between two key DEE nations. 

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Expected outcomes

The ultimate benefit of this research will be to increase productive investment, employment and growth in the target countries. Lessons drawn from the research can be extended to the firms of other emerging market countries and indeed developed countries like the UK. This will be achieved by uncovering the complex impact of new financial behaviour on investment decisions, analysis which can be used to redirect firm behaviour from unproductive speculative behaviour to productive investment. Individual firms are unable to step back from profit imperatives to consider the broader implications of their investment decisions in a rapidly changing international financial environment. 

The detailed insights into the nature, drivers, and implications of NFCs’ changing relations with financial markets at a sectoral level generated by the project will allow us to make concrete policy recommendations as to financial system design and financial regulation to support economic development in Brazil and Turkey. Insights include the long-term risk of speculative financial behaviour, suggestions of safer financial institutions and instruments, and increased knowledge of the link between financial and macrodynamics.  

The research outcomes will be beneficial for public bodies and industrial organisations and individual NFCs in Turkey and Brazil. The public bodies include both those with broad responsibility for setting macroeconomic policy (such as Central Banks and the Ministries of Development), as well as specific agencies with responsibility the development of industry (such as The Union of Chambers and Commodity Exchanges of Turkey and Istanbul Chamber of Industry). 

The project will provide these agencies with a detailed analysis of the changing patterns of firm-level financing and investment and its implications for long-term productivity and sustainability of employment and growth. The results will be disseminated and made available through short policy briefs sent to the relevant bodies. In the longer term, the applicant aims at organising national level workshops for the dissemination of the research. With this information, these bodies will be better able to formulate and implement evidence-based policy: incentivising operational changes consistent with a broader view of industrial development; structuring the development of domestic financial markets and rules for access to international markets; and designing regulatory systems to deter behaviour which might be detrimental to these same objectives.