Institutional Debt Holdings and Governance
62 Pages Posted: 7 Dec 2018 Last revised: 11 Jul 2019
Date Written: June 1, 2019
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: Suggested Citation