A Shared Interest: Do Bonds Strengthen Equity Monitoring?

Todd A. Gormley and Manish Jha

No 32530, NBER Working Papers from National Bureau of Economic Research, Inc

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 share an interest with equity investors in improving governance. 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. 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 share an interest with equity investors in improving governance. 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.

JEL-codes: G23 G30 G32 G34 K22 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-fmk
Note: CF
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Citations: View citations in EconPapers (3)

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