Ownership structure and the diversification and performance of publicly-listed companies in China Andrew Delios a, * , Nan Zhou b , Wei Wei Xu a a National University of Singapore, 1 Business Link, Singapore 117592, Singapore b Wharton School, University of Pennsylvania, 2048 Steinberg Hall — Dietrich Hall, 3620 Locust Walk, Philadelphia, PA 19104, U.S.A. 1. Company ownership and strategy in China For nearly two decades, China’s strong economic development has been a dominant story in the business press. Underlying and spurring this growth is the transition of state-owned assets to private ownership, facilitated by the creation in the early 1990s of the Shenzhen and Shanghai stock markets. Via these avenues, formerly state-owned firms be- gan to shift ownership shares to various types of private owners, ostensibly independent from the state. While in many transition economies the shift from state to private ownership has been accomplished in one swift, wholesale transfer of formerly state- owned assets, the ownership transition in China has been gradual, albeit inexorable. With the realloca- tion in ownership shares of major companies (e.g., Sinopec, Qingdao, DoubleStar, Jiangling Motors) in China to increasingly high levels of private ownership has come a shift in their strategies and performance. Underlying this shift is the fact that the motiva- tions, goals, and capabilities of a company are strong- ly related to the identity of its owners and how widely-held or dispersed is the shareholding in the company (Shleifer & Vishny, 1994). Companies that have widely-held shares by private investors, or those owned by institutional shareholders, tend to have a greater focus on shareholder wealth maximization strategies than do companies that have a dominant Business Horizons (2008) 51, 473—483 www.elsevier.com/locate/bushor KEYWORDS Ownership structure; Ownership identity; Diversification; Performance Abstract The growth and heightened competitiveness of listed companies in China share several central features. These include the gradual transition of state-owned assets to private investors, a rapid pace of product diversification, and impending rapid growth into international markets. In this article, we focus on measuring and identifying the implications of the ownership structure and diversification strategy of listed companies in China. We highlight recent developments in the ownership transition of China’s companies, and point to an ownership classification system that can better identify and address differences in the motivations, strategies, and performance of these companies. # 2008 Kelley School of Business, Indiana University. All rights reserved. * Corresponding author. E-mail addresses: andrew@nus.edu.sg (A. Delios), zhounan@wharton.upenn.edu (N. Zhou), xuweiwei@nus.edu.sg (W.W. Xu). 0007-6813/$ — see front matter # 2008 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2008.06.004 Copyright 2008 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800) 545-7685. BH 297