Institutional Debt Holder Governance

Journal of Financial and Quantitative Analysis, forthcoming

European Corporate Governance Institute - Finance Working Paper No. 613/2019

54 Pages Posted: 7 Dec 2018 Last revised: 5 May 2020

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: April 20, 2020

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, 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

Keswani, Aneel and Tran, Anh L. and Volpin, Paolo F., Institutional Debt Holder Governance (April 20, 2020). Journal of Financial and Quantitative Analysis, forthcoming, 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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