A Shared Interest: Do Bonds Strengthen Equity Monitoring?

65 Pages Posted: 25 Nov 2020 Last revised: 7 Mar 2024

See all articles by Todd A. Gormley

Todd A. Gormley

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

Manish Jha

Georgia State University - Department of Finance

Date Written: November 17, 2022

Abstract

Institutional investors conduct more governance research and are less likely to follow proxy advisor vote recommendations when a company’s bonds comprise a larger share of their assets. These findings are driven by bond holdings, shareholder proposals, and companies where fixed-income managers are more likely to be attentive and influence their institutions’ voting decisions. The findings do not concentrate on companies or shareholder proposals where creditor-shareholder conflicts are likely. Overall, the findings suggest that corporate bond holdings influence how actively institutions monitor their equity positions and contribute to institutions’ overall incentive to be engaged stewards.

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

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

Suggested Citation

Gormley, Todd A. and Jha, Manish, A Shared Interest: Do Bonds Strengthen Equity Monitoring? (November 17, 2022). European Corporate Governance Institute – Finance Working Paper No. 855/2022, 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

Georgia State University - Department of Finance ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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

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