The Role of Institutional Investors in Shareholder-creditor Conflicts

This thesis examines how institutional investors affect the agency relationship between shareholders and creditors. It finds that investors’ simultaneous holdings of debt and equity lead to lower levels of corporate cash holdings. The presence of dual holdings also reduces the likelihood of extreme negative returns in equity markets. In addition, the composition of institutional investors’ portfolios contains information valuable for debtholders when pricing public debt securities. Overall, this thesis highlights the importance of institutional ownership heterogeneity in various corporate financial aspects.