Does Common Institutional Ownership Matter for Credit Ratings?

Using a sample of Chinese A-share non-financial listed firms from 2008 to 2022, we document a significantly positive association between common institutional ownership and corporate credit ratings. Mechanism analyses indicate that this effect operates primarily through reductions in operational risk and improvements in information quality, reflecting the synergistic governance role of common institutional investors. Cross-sectional analyses further show that the positive effect is more pronounced for firms operating in regions with weaker legal environments, lower-quality internal controls, and weaker external monitoring.