Opposition to shareholder value: Bond rating agencies and conflicting logics in corporate finance

Abstract

Research examining the financialization of American firms has largely concentrated on the rise in the shareholder value orientation (SVO) among corporate managers and the subsequent adoption of specific corporate strategies. However, this article argues that in theories of finance, the SVO is a manifestation of only one of the logic models followed by investors-that of equity investment. Equally important, according to these theories, is the logic of debt investment which is often at odds with the logic of equity investment. This article demonstrates that overlooked influential actors in the field of corporate finance that subscribe to this logic of debt investment, i.e. bond rating agencies, are actively discouraging the spread of shareholder valuedriven corporate practices via the bond rating process. This is important given the shift to bond financing as the primary form of corporate finance in the USA.