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Common institutional ownership and corporate financial investment

Author

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  • Chen, Xiaoyu
  • Luo, Qi

Abstract

Excessive financial investment can hinder corporate sustainable development and broader economic growth. However, the influence of common institutional ownership on corporate financial investment remains insufficiently studied. Using a sample of Chinese listed firms from 2009 to 2022, this study examines whether, and through which channels, common institutional ownership influences corporate financial investment. We find that common institutional ownership significantly curbs financial investment and exacerbates investment structure bias toward real investment. Mechanism tests indicate that common institutional ownership inhibits financial investment by strengthening financing capacity, improving operational efficiency, and increasing innovative activities. The financialization inhibitory effect is stronger for single-segment firms, those in less competitive industries, and firms located in regions with stronger future-oriented culture. In addition, common institutional ownership alleviates the negative impact of financialization on future corporate core performance. Overall, the findings provide novel empirical evidence on the positive role of common institutional ownership in supporting real economic development.

Suggested Citation

  • Chen, Xiaoyu & Luo, Qi, 2026. "Common institutional ownership and corporate financial investment," Economic Modelling, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:ecmode:v:155:y:2026:i:c:s0264999325004183
    DOI: 10.1016/j.econmod.2025.107423
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    Keywords

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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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