Stock Market Capitalism: An Historical Perspective for the Two Decades Pre- and Post-1980

Authors : Ümran DEMİRÖRS

Pages : 161-184

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Publication Date : 2018-04-10

Article Type : Review Paper

Abstract :This study analyzes the historical transformation of the “Modern Corporation” expounded by Berle and Means in the early 20th century for the two decades pre-and post-1980. The 80s made an indelible mark on the behavior of Households together with Corporate Managers and Institutional Money Managers toward the risk of holding stocks due to changing economic, political and regulatory settings, hence affecting “Corporate Governance”. The Modern Corporation in the pre-1980 period was envisaged to be a social institution managed by so-called benevolent, elite, managers in a corporate system of consensual decision making called “Stakeholder Capitalism”. In the ensuing decades of the post-1980 period after the Reagan administration’s drastic changes in economic, political and regulatory settings, the Modern Corporation transformed into a lean but over-valued “Contemporary Corporation” of “Stock Market Capitalism”, emboldened with the maxim of “Shareholder Value”. Interestingly, this overvaluation of stocks has resulted in the growth in Households wealth in equity holdings outperforming the growth in National Income, becoming an automatic stabilizer of Household Sector consumption patterns. In the following pages, developments in the Modern Corporation and its premises will be discussed thoroughly and some policy conclusions affected by this outstanding growth in Household Sector wealth will be drawn.
Keywords : Stock Market CapitalisM

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