Abstract This study examines the impact of common institutional ownership on corporate mergers and acquisitions (M&A) within China’s emerging market. The findings suggest that, while common institutional ownership decreases the likelihood of M&A, it positively influences the merger announcement effect and merger performance. The heterogeneity analysis reveals that long-term and independent institutional investors play a more significant role in facilitating effective M&A. The mechanism analysis identifies two primary channels through which common institutional ownership exerts its influence: first, by leveraging acquisition experience and informational advantages to mitigate information asymmetry; second, by appointing directors and curbing managerial opportunism to strengthen corporate governance. These findings provide novel empirical evidence regarding the dual role of common institutional ownership in M&A, enriching the literature on its economic impact in emerging markets. Furthermore, they offer valuable insights for advancing well-structured M&A practices and refining capital market regulations.