The impact of common institutional ownership on financialization in non-financial enterprise: Exacerbation or inhibition?

This paper proposes that common institutional ownership positively affects the non-financial firm financialization by using data from Chinese listed firms from 2007 to 2022. The findings reveal that information asymmetry and financial constraints emerge as significant transmission mechanisms between common institutional ownership and firm financialization. Moreover, this positive relationship is more pronounced in state-owned enterprises, firms audited by non-Big 4 auditors, and those facing weaker market competition. •Common institutional ownership is positively associated with the financialization level of enterprises.•Information asymmetry and financing constraints are potential channels for this relationship.•Conspiracy tort hypothesis and investment substitution theory plays an important role in this process.•The role of common institutional investors in the market needs to be given attention by regulators.