Institutional Debt Holdings and Governance

62 Pages Posted: 7 Dec 2018 Last revised: 11 Jul 2019

See all articles by Aneel Keswani

Aneel Keswani

Faculty of Finance, Cass Business School, City University, London

Anh L. Tran

Cass Business School, City University London

Paolo F. Volpin

City University London - Faculty of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: June 1, 2019

Abstract

Using data on the universe of US‐based mutual funds, we find that two out of five fund families hold corporate bonds of firms in which they also own an equity stake. We show that the greater the fraction of debt a fund family holds in a given firm, the greater its propensity to vote in line with the interests of firm debt holders at shareholder meetings. In addition, portfolio firms tend to make corporate decisions that appear more in the interests of debt holders than shareholders when mutual fund companies hold more of their debt as compared to their equity.

Keywords: corporate governance, institutional investors, agency costs of debt

JEL Classification: G23, G34

Suggested Citation

Keswani, Aneel and Tran, Anh L. and Volpin, Paolo F., Institutional Debt Holdings and Governance (June 1, 2019). European Corporate Governance Institute - Finance Working Paper No. 613/2019. Available at SSRN: https://ssrn.com/abstract=3282394 or http://dx.doi.org/10.2139/ssrn.3282394

Aneel Keswani

Faculty of Finance, Cass Business School, City University, London ( email )

106 Bunhill Row
London EC1Y 8TZ
Great Britain
+44 207 040 8763 (Phone)

Anh L. Tran

Cass Business School, City University London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44-207-040-5109 (Phone)
+44-207-040-8881 (Fax)

HOME PAGE: http://https://www.cass.city.ac.uk/faculties-and-research/experts/anh-tran

Paolo F. Volpin (Contact Author)

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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