How Does the Financialization of the Economy Affect Lobbying? Firm-Level Evidence from the Involvement of Non-Financial Corporates in Financial Regulatory Policymaking

We investigate the relationship between the financialization of the economy and the political agency of non-financial firms in the context of financial regulatory policy making. The policymaking process that has characterized the attempts to regulate financial markets in the US in the aftermath of the financial crisis offers anecdotal evidence that many non-financial corporates have become vocal allies of the financial industry. How can we explain the engagement of non-financial corporates with financial regulatory politics? We attempt to answer these questions through the analysis of extensive new data which combines information on the mobilization of non-financial corporates in the context of financial regulatory policy consultations with numerous new indicators of financialization, from corporate balance sheets to ownership to elite network ties. This data allow us to test three specific mechanisms by which financialization might plausibly effect the willingness of non-financial corporates to engage in advocacy over financial regulatory policy. First, the ‘asset financialization’ hypothesis relates the political agency of non-financial firm to the fact that non-financial firms are themselves becoming more financialized and increasing their investments in financial assets. Second, the ‘financial dependence’ focuses instead on the liability side of the balance sheet, and holds that the incentives for non-financial firms to mobilize in the financial policymaking process is related to their reliance on financial firms for their external financing needs. Third, the ‘control financialization’ hypothesis, holds that non-financial corporates engage in financial regulatory advocacy because they are being controlled by financial firms who own them.