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Capital and income financialization: Accounting for the 2008 financial crisis

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  • Hatherly, David
  • Kretzschmar, Gavin

Abstract

Financialization is recognised as a key feature of the 2008 financial crisis. We argue that a lesson is the need for an accounting framework which focuses upon financialization allowing it to be monitored and controlled by stakeholders. We argue that financialization has been permitted through the failure of accounting to distinguish distributable income from capital gains/transfers and to distinguish productive from speculative capital. We introduce an accounting presentation (4S accounting) which effectively makes these distinctions. We use a stylized example to illustrate how it should be applied to the financial reporting of banks.

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  • Hatherly, David & Kretzschmar, Gavin, 2011. "Capital and income financialization: Accounting for the 2008 financial crisis," Accounting forum, Elsevier, vol. 35(4), pages 209-216.
    • Handle: RePEc:eee:accfor:v:35:y:2011:i:4:p:209-216
    DOI: 10.1016/j.accfor.2011.06.010
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    References listed on IDEAS

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    1. Heilpern, Eliot & Haslam, Colin & Andersson, Tord, 2009. "When it comes to the crunch: What are the drivers of the US banking crisis?," Accounting forum, Elsevier, vol. 33(2), pages 99-113.
    2. Eliot Heilpern & Colin Haslam & Tord Andersson, 2009. "When it comes to the crunch: What are the drivers of the US banking crisis?," Accounting Forum, Taylor & Francis Journals, vol. 33(2), pages 99-113, June.
    3. Richardson, Alan J., 1987. "Accounting as a legitimating institution," Accounting, Organizations and Society, Elsevier, vol. 12(4), pages 341-355, June.
    4. Michael Bromwich & Richard Macve & Shyam Sunder, 2010. "Hicksian Income in the Conceptual Framework," Abacus, Accounting Foundation, University of Sydney, vol. 46(3), pages 348-376, September.
    5. Mary Barth & Wayne Landsman, 2010. "How did Financial Reporting Contribute to the Financial Crisis?," European Accounting Review, Taylor & Francis Journals, vol. 19(3), pages 399-423.
    6. Andersson, Tord & Haslam, Colin & Lee, Edward & Tsitsianis, Nick, 2008. "Financialization directing strategy," Accounting forum, Elsevier, vol. 32(4), pages 261-275.
    7. Andersson, Tord & Haslam, Colin & Lee, Edward & Katechos, George & Tsitsianis, Nick, 2010. "Corporate strategy financialized: Conjuncture, arbitrage and earnings capacity in the S&P500," Accounting forum, Elsevier, vol. 34(3), pages 211-221.
    8. Tord Andersson & Colin Haslam & Edward Lee & Nick Tsitsianis, 2008. "Financialization directing strategy," Accounting Forum, Taylor & Francis Journals, vol. 32(4), pages 261-275, December.
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    Cited by:

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    2. Beisland, Leif Atle, 2014. "Equity valuation in practice: The influence of net financial expenses," Accounting forum, Elsevier, vol. 38(2), pages 122-131.

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