Abstract
This study investigates whether common institutional ownership (CIO) between firms in the same industry leads to more similar behavior between them in the context of firm investment. Using a sample of Chinese A-share listed firms from 2003 to 2021, we find, at the firm-pair level, that the stronger the CIO ties between two firms, the more similar their investment behavior. Further analysis shows that the impact of CIO on investment similarity is more pronounced in industries with lower market concentration (i.e., more intense market competition). CIO is not associated with underinvestment but is linked to higher investment efficiency and firm value. Common institutional investors with greater industry power can strengthen the negative relationship between CIO and investment dissimilarity. These results are consistent with the underlying logic of knowledge-sharing in the presence of CIO but are inconsistent with anti-competitive effects.
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