Bonds Lie in the Portfolio of the Beholder: Do Bonds Affect Equity Monitoring?

51 Pages Posted: 25 Nov 2020

See all articles by Todd A. Gormley

Todd A. Gormley

Washington University in St. Louis; European Corporate Governance Institute (ECGI)

Manish Jha

Washington University in St. Louis - John M. Olin Business School

Date Written: November 10, 2020

Abstract

We analyze whether institutional investors’ increasingly extensive corporate bond holdings are associated with how actively institutions vote and monitor their equity investments. We find that institutions conduct more governance research and are less likely to follow proxy advisor vote recommendations for companies whose bonds represent a larger proportion of their overall portfolio. Corporate bonds held in equity-focused funds and shareholder proposals that are more likely to require investors’ attention drive these findings. There is no evidence that creditor-shareholder conflicts explain these findings. Our results suggest that institutions’ bond holdings contribute to their overall incentive to be engaged monitors.

Keywords: bonds, governance, institutional investors, attention, voting

JEL Classification: G23, G30, G32, G34, K22

Suggested Citation

Gormley, Todd A. and Jha, Manish, Bonds Lie in the Portfolio of the Beholder: Do Bonds Affect Equity Monitoring? (November 10, 2020). Available at SSRN: https://ssrn.com/abstract=3719187 or http://dx.doi.org/10.2139/ssrn.3719187

Todd A. Gormley (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
(314) 935-7171 (Phone)

HOME PAGE: http://www.gormley.info

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Manish Jha

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St Louis, MO 63130-4899
United States
314-250-8129 (Phone)

HOME PAGE: http://mjha91.github.io

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