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Legal Person Ownership, Diversification Strategy and Firm Profitability in China

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  • Andrew Delios

  • Zhi Wu

Abstract

Legal person ownership is the second largest ownership identity in China’s public listed companies, yet it has received limited attention compared to the already extensive research on China’s state ownership. We investigate the relationships between the concentration of legal person shareholding, product diversification and firm performance for China’s listed companies. We find that relying on legal person shareholder as a lever for more profit-oriented governance cannot be an unqualified linear prescription, but it has this effect only if legal person shareholders have a high level of ownership concentration and are not in a minority ownership position. Copyright Springer 2005

Suggested Citation

  • Andrew Delios & Zhi Wu, 2005. "Legal Person Ownership, Diversification Strategy and Firm Profitability in China," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 9(2), pages 151-169, June.
    • Handle: RePEc:kap:jmgtgv:v:9:y:2005:i:2:p:151-169
    DOI: 10.1007/s10997-005-4034-9
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    References listed on IDEAS

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    1. Xiaonian Xu & Yan Wang, 1997. "Ownership structure, corporate governance, and corporate performance : the case of Chinese stock companies," Policy Research Working Paper Series 1794, The World Bank.
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    Cited by:

    1. Chalmers, Keryn & Haman, Janto & Qu, Wen, 2014. "China’s Securities reforms and IPO wealth loss," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(3), pages 161-175.
    2. Lu, Baizhou & Hao, Wei & Liao, Jing & Wongchoti, Udomsak, 2023. "A leap of faith that echoes well? The value impact of Chinese firms starting up business overseas," Global Finance Journal, Elsevier, vol. 57(C).
    3. Korkeamäki, Timo & Virk, Nader & Wang, Haizhi & Wang, Peng, 2018. "Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market," BOFIT Discussion Papers 19/2018, Bank of Finland Institute for Emerging Economies (BOFIT).
    4. Berger, Allen N. & Hasan, Iftekhar & Korhonen, Iikka & Zhou, Mingming, 2010. "Does diversification increase or decrease bank risk and performance? : Evidence on diversification and the risk-return tradeoff in banking," BOFIT Discussion Papers 9/2010, Bank of Finland, Institute for Economies in Transition.
    5. Korkeamäki, Timo & Virk, Nader & Wang, Haizhi & Wang, Peng, 2019. "Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 190-203.
    6. Michael Firth & Sonia Wong & Yong Yang, 2014. "The double-edged sword of CEO/chairperson duality in corporatized state-owned firms: evidence from top management turnover in China," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(1), pages 207-244, February.
    7. Qiming Li & Wenhuan Wang & Yiping Lou & Ke Cheng & Xiaoguang Yang, 2016. "Diversification and Corporate Performance: Evidence from China’s Listed Energy Companies," Sustainability, MDPI, vol. 8(10), pages 1-17, September.
    8. Ma, Xufei & Yiu, Daphne W. & Zhou, Nan, 2014. "Facing global economic crisis: Foreign sales, ownership groups, and corporate value," Journal of World Business, Elsevier, vol. 49(1), pages 87-100.
    9. Jiang, Bing-Bing & LAURENCESON, James & Tang, Kam Ki, 2008. "Share reform and the performance of China's listed companies," China Economic Review, Elsevier, vol. 19(3), pages 489-501, September.
    10. Ines Kahloul & Anouar Ben Mabrouk & Slah-Eddine Hallara, 2010. "Wavelet-Based Prediction for Governance, Diversification and Value Creation Variables," Papers 1011.5020, arXiv.org.
    11. Berger, Allen N. & Hasan, Iftekhar & Korhonen, Iikka & Zhou, Mingming, 2010. "Does diversification increase or decrease bank risk and performance? Evidence on diversification and the risk-return tradeoff in banking," BOFIT Discussion Papers 9/2010, Bank of Finland Institute for Emerging Economies (BOFIT).
    12. Kang, Young-Sam & Kim, Byung-Yeon, 2012. "Ownership structure and firm performance: Evidence from the Chinese corporate reform," China Economic Review, Elsevier, vol. 23(2), pages 471-481.
    13. James Laurenceson & Bing Bing Jiang & Kam Ki Tang, "undated". "Share reform and the performance of China�s listed companies," EAERG Discussion Paper Series 1005, School of Economics, University of Queensland, Australia.
    14. Anna P. I. Vong & Duarte Trigueiros, 2014. "Reversal in the relative performance of state- and legal person-owned companies during the Chinese split share structure reform," Applied Economics, Taylor & Francis Journals, vol. 46(15), pages 1728-1750, May.
    15. Shiguang Ma & Tony Naughton & Gary Tian, 2010. "Ownership and ownership concentration: which is important in determining the performance of China’s listed firms?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(4), pages 871-897, December.
    16. Ma, Ming & Sun, Xian & Waisman, Maya & Zhu, Yun, 2016. "State ownership and market liberalization: Evidence from China's domestic M&A market," Journal of International Money and Finance, Elsevier, vol. 69(C), pages 205-223.
    17. Korkeamäki, Timo & Virk, Nader & Wang, Haizhi & Wang, Peng, 2018. "Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market," BOFIT Discussion Papers 19/2018, Bank of Finland, Institute for Economies in Transition.
    18. Yuan, Lin & Pangarkar, Nitin & Wu, Jie, 2016. "The interactive effect of time and host country location on Chinese MNCs’ performance: An empirical investigation," Journal of World Business, Elsevier, vol. 51(2), pages 331-342.
    19. Lin, Tsui-Jung & Tsai, Han-Fang & Imamah, Nur & Hung, Jung-Hua, 2016. "Does the identity of multiple large shareholders affect the value of excess cash? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 40(PA), pages 173-190.
    20. Li, Dan & Miller, Stewart R. & Eden, Lorraine & Hitt, Michael A., 2012. "The Impact of Rule of Law on Market Value Creation for Local Alliance Partners in BRIC Countries," Journal of International Management, Elsevier, vol. 18(4), pages 305-321.
    21. Jakob Arnoldi & Yulia Muratova, 2019. "Unrelated acquisitions in China: The role of political ownership and political connections," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 113-134, March.

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