Mutual fund dual holding and shareholder-creditor conflicts


Speaker


Abstract

- Co-authored with Shuo Xia -

Over the past decade, many mutual fund families have become dual holders of their portfolio companies, simultaneously holding bonds and stocks of the same firm. We study how such dual holdings affect shareholder-creditor conflicts, and find strong evidence that dual holdings mitigate debt overhang problems. Financially constrained firms with dual holdings are more likely to increase valuable investments and issue bonds with lower yields and fewer restrictive covenants. Meanwhile, we find no significant changes in firm risk and payout policy. Our results are robust to a diff-in-diff analysis exploiting the variation in dual ownership from cross-family fund mergers. Overall, our findings suggest that fund families internalize the agency costs of their portfolio companies, highlighting the benefits of institutional ownership.

Zoom

: eur-nl.zoom.us/j/95156065612


Meeting ID: 951 5606 5612