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Purpose Common institutional ownership, as external shareholders associated with multiple companies in the same industry, have access to richer sources of information. As the phenomenon of shareholder linkage becomes more and more common in the securities market, it is of great practical significance to clarify the impact of mutual shareholding. Design/methodology/approach This paper empirically examines the relationship between common institutional ownership and firms' innovation efficiency, using a sample of all listed companies in China's Shanghai and Shenzhen A-shares from 2010 to 2023. Findings It is found that common institutional ownership can generate combined effects that improve corporate innovation efficiency. It is further found that the level of internal control and information environment play a positive moderating role in the above relationship. In addition, common institutional ownership has more significant effects on the innovation efficiency of enterprises with higher agency costs and non-state-owned enterprises. Originality/value This paper verifies the positive role of common institutional ownership in the decision-making of Chinese listed firms from the micro perspective of corporate governance, and also provides useful references for other emerging market countries to optimize the governance efficiency of institutional ownership and enhance the innovation capacity of firms.
Lu et al. (Tue,) studied this question.