Institutional Debt Holder Governance
Journal of Financial and Quantitative Analysis, forthcoming
54 Pages Posted: 7 Dec 2018 Last revised: 5 May 2020
Date Written: April 20, 2020
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, even when against ISS recommendation. Voting has direct policy consequences as firms that receive more votes in favor of creditors make corporate decisions more in line with the interests of debt holders.
Keywords: corporate governance, institutional investors, agency costs of debt
JEL Classification: G23, G34
Suggested Citation: Suggested Citation