This study empirically examines the relationship between common institutional ownership and company’s short-term loans for long-term investments based on data from A-share listed companies from 2008 to 2022. The results indicate that common institutional ownership significantly mitigates company’s short-term loans for long-term investments, primarily through information coordination and supervisory governance effects. This inhibitory effect is more pronounced in non-state-owned enterprises, firms with lower analyst coverage, and in less competitive markets. Furthermore, economic policy uncertainty is found to weaken the governance effect of common institutional ownership. Ultimately, common institutional ownership reduces firms’ financial risks and audit fees by inhibiting short-term loans for long-term investments. The findings provide insights for promoting the development of common institutional ownership, managing company’s short-term loans for long-term investments, and improving relevant regulatory measures.