How does common institutional ownership affect firm green innovation efficiency?

Purpose This study aims to examine the impact of common institutional ownership (CIO) on firm green innovation efficiency, as well as the underlying mediating mechanisms and boundary conditions. Design/methodology/approach Using panel data from China’s A-share-listed firms from 2010 to 2024, this study uses a two-way fixed-effects model to test the hypotheses. Findings Empirical results indicate that CIO significantly enhances firm green innovation efficiency. This enhancement is achieved by reducing agency costs and improving environmental information disclosure quality. Furthermore, the positive effect is stronger in firms with stable institutional investors, stringent environmental regulations, high uncertainty and non-state-owned enterprises. Originality/value By introducing CIO as a key network-based governance factor, this study extends the literature on the determinants of firm green innovation efficiency. Through the incorporation of the input–conversion–output framework, authors further demonstrate that CIO enhances green innovation efficiency by lowering agency costs and improving the quality of environmental information disclosure, thereby systematically validating the synergistic governance effect of CIO for the first time in the context of green innovation. Additionally, the study delineates nuanced boundary conditions for CIOs’ effectiveness, offering actionable insights for policymakers, corporate managers and institutional investors.