Financialisation and Physical Investment: A global race to the bottom in accumulation?

In this article we estimate the effects of financialisation on investment in the developed and developing countries using panel data based on balance-sheets of publicly listed non-financial companies (NFCs) supplied by Worldscope for the period 1995-2015. Among the developed economies, we focus on the USA, Japan, and a group of Western European countries. In the developing world, we present estimations based on the group of the NFCs in all developing countries as well as BRICS as a group - and country specific estimations for South Africa, South Korea, India, and China, for which there are data for a sufficiently large group of companies. We find robust evidence of an adverse effect of both financial payments (interest and dividends) and incomes on investment in fixed assets. The negative impacts of financial incomes are non-linear with respect to the companies' size; financial incomes crowd out investment in large companies, and have a positive effect on the investment of only smaller, relatively more credit-constrained companies. Our analysis contributes to the literature by providing evidence on the multifaceted relationship between financialization and corporate investment in developed and emerging countries.