From Public Good to Corporate Enterprise: The Financialisation of Universities, The Consequences, and What Must Be Done – Part I

John H Howard, September 2025

In recent months, Australian universities have faced increasing scrutiny over their role in the economy, particularly regarding their growing emphasis on financial sustainability. This shift, driven by the imposition of commercial accounting standards and financial reporting, has transformed universities into public corporations, and even public enterprises, which are assessed under financial performance metrics similar to those of private businesses.

Although these measures were initially driven by the accounting standards bodies to improve transparency, efficiency, and public accountability, they have ultimately compromised universities’ capacity to accomplish their traditional missions.

Many leaders, academics, and stakeholders in the sector and the community wish to return to the fundamental values of scholarship, community engagement, and knowledge creation; however, they increasingly feel constrained by the terminology of corporate finance, such as operating margins, gross and net earnings, return on investment (ROI), and key performance indicators (KPIs), which are not really appropriate for educational institutions.

The Financialisation of Universities: A Pathway to Growth?

Most Australian universities have been established and incorporated through State or Territory legislation as statutory public corporations, with the Australian National University created under Commonwealth legislation. Universities have long been recognised as public bodies, holding both Deductible Gift Recipient (DRG) status for tax purposes and charitable status for the advancement of education. During the 1990s, the introduction of accrual accounting frameworks and the influence of New Public Management reshaped their governance and operations, aligning them more closely with commercial and managerial practices.

Since the adoption of accrual accounting and alignment with International Financial Reporting Standards, Australian universities have been assessed by Government Auditors General using frameworks originally designed for private enterprises. This has introduced measures of financial performance, profitability, revenue growth, and return on investment, which sit uneasily with their broader public purposes. At the same time, research-based metrics such as citations, HDR completions, and grants provide only indirect connections to financial outcomes.

Several of these metrics push universities to equate success with expansion, mirroring corporate growth models. But many of the world’s most respected institutions, such as Harvard, Caltech, ETH Zurich, or the London School of Economics, have relatively small student numbers compared to the larger Australian universities. Their strength is not in scale but in focus, intellectual intensity, and distinctive academic culture. By privileging size over quality, growth-oriented metrics risk homogenising universities and diminishing the diversity and specialisation that underpin long-term excellence.

With the growth in the size of Australian universities, financial sustainability has, ironically, become a dominant concern, often overshadowing universities’ intellectual and civic contributions. Australia’s largest universities are substantial providers of international education, major property developers, investors in equity and bond markets, and owners of extensive financial and entrepreneurial assets. In financial terms, they are comparable to some of Australia’s larger publicly listed corporations.

In 2023, the latest year for which comprehensive results are available, universities reported combined revenues of $40.0 billion and expenses of $39.9 billion. They also reported $110.8 billion in total assets and $74.2 billion in net assets. At the end of the financial year, they held $6.1 billion in cash and cash equivalents. This information is set out in the table below, together with details for the total of Go8 universities and the nation’s three largest universities.

| Sector | Revenues ($billion) | Expenses ($ billion) | Total Assets

Given the financial significance of the public higher education sector, it is unsurprising that there are strong expectations for accountability from both the government and the community. Arguably, these expectations have gone further than intended, with business imperatives becoming increasingly entangled with academic life.

Consequences of a Fixation with Business Imperatives

Normally, in business, a clear distinction exists between financial accounting, concerned with statutory reporting, and management accounting, used for planning, budgeting, and decision-making. In universities, however, this distinction has narrowed. External reporting requirements, framed by commercial accounting standards, now seem to drive internal budgeting and performance processes. The effect is that resource allocation decisions are increasingly shaped by compliance-oriented financial results rather than by information tailored to support academic and strategic priorities[1].

When external financial reporting standards spill into internal management processes, they reshape how cost recovery is calculated. In business, each unit is typically expected to show that it covers its own costs. Universities, however, have long relied on deliberate cross-subsidies between disciplines, for example, revenue from business or law schools underwriting the higher costs of medicine, science, or humanities. These cross-subsidies are intentional and reflect the idea that a university is an integrated institution serving a broad educational, cultural, and social missions.

The application of commercial accounting logic risks obscuring this practice. Cost recovery calculations that treat each course or faculty as an independent financial unit can present cross-subsidies as inefficiencies or deficits, rather than as structural features of a balanced academic portfolio. This can distort internal decisions, penalising disciplines that are central to a university’s identity but not “profitable” in narrow terms. In turn, it undermines a governance tradition that views the university as a whole-of-institution enterprise, rather than a collection of business units.

Universities have long been expected to be hubs of knowledge, promoting research, critical inquiry, and public engagement. They have served as centres of intellectual exploration, dedicated to the pursuit of knowledge creation and dissemination for the greater good. However, the implementation of corporate-style financial management has reshaped the priorities of universities.

This shift has resulted in significant consequences. Academic programs and research areas that do not guarantee immediate financial returns or contribute to the narrow metrics utilised in funding allocation models are increasingly underfunded or neglected, even though they hold significant long-term societal value.

This posting is continued in Part II

[1] Financial accounting refers to statutory reports prepared under accounting standards, showing the organisation’s overall financial position and performance. Management accounting, by contrast, is used internally for planning, budgeting, and decision-making. It is forward-looking and selective, providing information tailored to management needs rather than to external compliance requirements.