•The paper reviews the literature and develops a model which is then tested empirically using the data from the Shenzhen Stock Exchange in the Chinese context.•This paper examines the relationship between institutional investor research, institutional investor heterogeneity and the company's equity capital cost.•The study reveals that institutional investor research can significantly reduce the company's cost of equity capital.•The greater the proportion of field research in the total investment activity, the lower the company's equity capital cost.•The institutional investors can reduce the company's capital cost by conducting on-the-spot investigations, on-site visits, etc., intervening in corporate governance, improving the company's information disclosure level, and playing the role of external supervision. Based on the data from a Chinese capital market, this paper examines the relationship between institutional investor research, institutional investor heterogeneity and the company's equity capital cost. The paper reviews the extant literature from which it develops a model which is then tested empirically using the data from the Shenzhen Stock Exchange in the Chinese context. The paper reveals that institutional investor research can significantly reduce the company's cost of equity capital. That is, the greater the proportion of field research in the total investment activity, the lower the company's equity capital cost. Moreover, institutional investors can reduce the company's capital cost by conducting on-the-spot investigations, on-site visits, etc., intervening in corporate governance, improving the company's information disclosure level, and playing the role of external supervision.