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.

We document that judges’ political affiliations are strongly associated with the level of judicial penalties levied against companies. For example, Republican-appointed judges impose larger fines for hiring illegal immigrants, while Democrat-appointed judges impose larger fines for pollution- and environment-related violations. Time-series variation suggests that political partisanship, not fixed ideological differences, drives these findings. The differences become amplified when higher-court judicial vacancies exist and in the months before national elections. Our findings highlight the importance of political polarization for U.S. companies and illustrate how judicial composition can affect firms’ incentive to avoid violating laws connected to partisan issues.