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Institutional Debtholder Governance

Published online by Cambridge University Press:  04 August 2020

Aneel Keswani ,
Anh Tran  and
Paolo Volpin Open the ORCID record for Paolo Volpin [Opens in a new window]
Aneel Keswani
Affiliation:
City University of London Cass Business Schoola.keswani@city.ac.uk
Anh Tran
Affiliation:
City University of London Cass Business Schoolanh.tran@city.ac.uk
Paolo Volpin*
Affiliation:
City University of London Cass Business School
*
paolo.volpin.1@city.ac.uk (corresponding author)
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Abstract

Using data on the universe of U.S. 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 debtholders at shareholder meetings, even when against Institutional Shareholder Services (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 debtholders.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 6 , September 2021 , pp. 2103 - 2135
Copyright
© The Author(s), 2020. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank Pat Akey, Seth Armitage, Lucian Bebchuk, Bo Becker, Maria Boutchkova, Max Bruche, Walid Busaba, Kevin Crotty, Craig Doidge, Craig Dunbar, David Goldreich, Andrey Golubov Amit Goyal, Nandini Gupta, Bing Han, Neeltje van Horen, Wei Jiang, Tim Jenkinson, Dirk Jenter, Raymond Kan, Leora Klapper, Nam Le, Ulf von Lilienfeld-Toal, Lucy Liu, Ernst Maug, Joel Peress, Christopher Polk, Zacharias Sautner, Henri Servaes, Clemens Sialm, David Stolin, Javier Suarez, Josef Zechner, seminar participants at Cardiff University, Ivey Business School, Rotman School of Management, University of Edinburgh, University of Liverpool, University of Strathclyde, and conference participants at the 2018 Luxembourg Asset Management Summit and the 2019 Vietnam International Conference in Finance for comments and suggestions. We appreciate the constructive and insightful comments provided by an anonymous referee. All errors are our responsibility.

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