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The Corporate Investment Benefits of Mutual Fund Dual Holdings
Published online by Cambridge University Press: 15 December 2023
Abstract
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Mutual fund families increasingly hold bonds and stocks from the same firm. We present evidence that dual ownership allows firms to increase valuable investments and refinance by issuing bonds with lower yields and fewer restrictive covenants, especially when firms face financial distress. Dual holders also prevent overinvestment by firms with entrenched managers. Overall, our results suggest that mutual fund families internalize the agency conflicts of their portfolio companies, highlighting the positive governance externalities of intra-family cooperation.
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- Research Article
- Information
- Creative Commons
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.- Copyright
- © The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington
Footnotes
We thank Michela Altieri, Bo Becker, Andriy Bodnaruk, Dion Bongaerts, Yongqiang Chu, Stefano Colonnello, Yun Dai, Miguel Ferreira, Alberta Di Giuli, Halit Gonenc, Niels Hermes, Stefano Lugo, Simon Mayer, Pedro Saffi, Naciye Sekerci, Dong Yan, seminar participants at Amsterdam Business School, Erasmus University Rotterdam, and VU Amsterdam, and participants at the 2021 DGF, the 2021 ICGS Corporate Governance conference, the 2022 EFMA, the 2022 FMA European Conference, the 2022 Corporate Finance Day, and the 2022 EUROFIDAI-ESSEC Paris December Finance Meeting for insightful comments. All errors are our own.
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