A Shared Interest: Do Bonds Strengthen Equity Monitoring?
65 Pages Posted: 25 Nov 2020 Last revised: 7 Mar 2024
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: Suggested Citation