Macroeconomic effects of financialisation

In an Express Tribune opinion article published on October 25, economist argues that shareholder-focused companies can boost reported profits through workforce reductions, outsourcing, share buybacks and larger payouts, while weakening investment in productive assets. The writer says executives’ incentives and short-term contracts can reinforce that approach, and that borrowing to fund buybacks can leave firms more leveraged.

The article contends that debt-financed household spending also shifts income towards higher-income bondholders and can weigh on consumption over time as borrowers repay debt. It notes that PSX-listed firms in cement, banking, insurance, textile and pharmaceutical subsectors have repurchased shares during the past four years, and concludes that financialisation can restrain investment and aggregate demand.