The most successful companies in the Greater China region—which includes Mainland China, Hong Kong, and Taiwan—are developing quickly into sophisticated, professionally managed businesses.
Nevertheless, although it is difficult to generalize across all three markets, many of these companies continue to trail their peers elsewhere in a critical management metric: total shareholder return (TSR), which combines capital gains with free-cash-flow contributions (including dividends and share repurchases) to measure a company’s stock performance over time. But TSR isn’t just a measure of overall value creation; it is also an essential management tool, offering benefits ranging from better strategic decision making to higher employee retention.
Companies in Greater China should be making greater use of this tool, not just to improve returns to shareholders and create more value, but also to attract institutional investors from around the world that actively participate in their local stock markets. As companies that have successfully boosted their TSR have shown, such outreach requires careful alignment and optimization of strategies across business, financial, and investor relations (IR) aspects of their operations.
In this report, our first value creators study to focus on Greater China, we analyze the current state of value creation in Greater China companies and explore how TSR can transform management practices and create value in these increasingly important markets.
The Evolving Business Environment in Greater China
Companies in Greater China have long faced a variety of local constraints and challenges. During Greater China’s period of rapid economic growth, for example, many companies focused primarily on expansion and scale. But as traditional growth engines weaken, overcapacity, weak demand, and debt burden are emerging as major risks for companies in many sectors of the region—and forcing them to transform. For example, Real-estate companies in Greater China are entering a mature phase in which growth depends less on aggressive development and more on optimizing assets, improving product quality, stabilizing finances, and developing more sustainable operating models.
In addition, many companies have historically operated under traditional family-controlled management models and mindsets in which TSR received insufficient attention because companies viewed it as an isolated financial or investor relations topic. As they transition away from generational ownership, however, companies are entering a new stage of corporate governance, appointing professional managers, adopting modernized and professional management structures, and reducing risks tied to family succession. Crucial to this transition is a greater strategic emphasis on key management metrics such as TSR.
The investor landscape in Greater China is evolving, too. Historically, retail investors have dominated it, especially in the Mainland China and Taiwan markets. Now, more companies in Greater China are starting to operate globally—not just supporting infrastructure construction in developing countries in Asia and Africa, but also investing in European and North American operations and extending their supply chains outside traditional regional boundaries. This trend has boosted these companies’ exposure to global institutional investors, who increasingly focus on fundamentals and demand a go-forward strategy, such as balance sheet optimization, to reassess value creation priorities.
As these changes force businesses to evolve, it has become essential for companies to adopt a long-term-oriented TSR lens.
What Is TSR and Why Does It Matter?
As businesses evolve, aligning a company’s performance on business fundamentals with shareholder expectations is a prerequisite for long-term success. This is especially true for companies in Greater China, where linking financial fundamentals to institutional investors’ expectations could yield outsized value creation benefits.
TSR reflects the full range of management actions and levers, so it calls for alignment of business, financial, and investor strategies. TSR is derived from three interlinked sources: earnings growth (including both revenue growth and changes in net-income margin percentage); change in price-to-earnings multiples; and free cash-flow contribution (including dividends and share repurchases).
Companies in Greater China have traditionally focused their corporate strategy on business issues such as revenue growth and margins as a means to create value. Incorporating TSR into their management toolkit is critical to developing a more complete strategy for value creation. This includes financial matters such as a company’s capital structure and dividend policy and investor concerns such as valuation multiple and IR messaging. (See Exhibit 1.)
The benefits of focusing on TSR extend to all stakeholders. By emphasizing the metrics that underlie TSR, CEOs can make better long-term strategic decisions, and the finance function can optimize capital allocation. TSR helps managers clarify the true sources of value creation at a business unit or regional level. And because TSR is difficult to manipulate, the metric creates a level playing for management and investors alike. Finally, linking incentive plans to TSR can help attract and retain key staff. Taken together, these efforts can help build great companies and great stocks, with higher valuation multiples and a stable base of institutional investors.
Five-Year TSR in Greater China Markets
Over the past five years (June 2020 to June 2025), despite the many benefits of TSR, Greater China’s TSR across its four capital markets—the Taiwan Stock Exchange (TWSE), the Hong Kong Stock Exchange (H-shares), the Shanghai and Shenzhen exchanges (A-shares), and Chinese companies listed on US exchanges—has generally trailed that of other major markets, with TWSE-listed shares being the only capital market to keep pace. (See Exhibit 2.)
These results are not surprising. Despite efforts by companies in the region to adopt more modern management techniques and governance mechanisms, many still receive a geographic discount: 60% of those with dual listings in their home Greater China exchanges and in the US registered lower TSRs in the US than in their local markets.
Still, across the four capital markets, a number of companies managed to achieve impressive TSR over the past five years. Companies in the top quartile for TSR performance succeeded by pulling three key levers: profitable growth, multiple expansion, and strong cash flow. (See Exhibit 3.)
The top performers among banks listed on the Hong Kong market show what it takes to succeed. From June 2020 to June 2025, the market’s banking sector delivered median TSR of 12.8% overall, exceeding the median 7.1% TSR of all H-share stocks analyzed.
As a clear leader in profitable growth, Bank A achieved a high-single-digit compound annual growth rate of adjusted tangible common equity over the past five years. As a result, it stands among the banking sector’s top-quartile TSR performers.
Even among peers with similar levels of profitable growth, however, the trajectory of valuation multiple changes sometimes differs significantly. Over the same period, Bank B’s valuation multiple expanded by mid-teen percentages, whereas Bank C’s valuation multiple contracted by mid-single-digits and Bank D’s flattened, despite similar levels of profitable growth.
Bank B’s outperformance in TSR was due in part to its bold and structured investor strategy, supported by a sophisticated IR function. Steered by its experienced chief strategy officer, the bank’s IR function provided more strategic disclosures to investors and encouraged active investor engagement, including regular investor seminar days.
This example reinforces the point that linking business direction to capital market expectations is essential to driving TSR in a sustainable way that supports long-term value creation in line with the expectations of long-term-oriented shareholders. In contrast, Bank D appeared to lack these elements; for instance, the company’s website did not include a well-organized IR section.
Bank B has also been disclosing its dividend payout history on its website since the late 1990s. This signals to investors a commitment to maintaining a stable dividend policy. Bank B isn’t perfect, however. Despite its success, it has yet to establish a fully mature financial strategy or a forward-looking capital management framework.
How Can Companies in Greater China Improve Their TSR?
Companies in Greater China that want to create more value and attract more investors would benefit from three particular advantages of TSR management:
- Strengthen strategic alignment. By using an empirical, value-driven approach to demystify valuation drivers, companies can better define their desired strategic outcome and management priorities. Doing so requires carefully analyzing the KPIs that matter most for creating value. A bank, for example, could focus on key profit variables such as return on tangible equity, on asset growth, and on balance sheet metrics such as dividends as a percentage of revenue as the basis for strategic action.
- Sharpen capital allocation. Not every dollar of profit is created equal. To strengthen TSR, it is essential to ensure that companies put capital to optimal use, whether in the form of organic growth, M&A, digital capabilities, payouts, or other objectives. Companies should analyze the entire business unit portfolio and operating region to determine their past individual TSR. Then they should set out forward-looking TSR goals for each unit and region, and develop plans for reaching those goals. This is especially important for companies that operate as conglomerates. In Greater China, 69% of conglomerates operating across multiple sectors have delivered TSR performance below the 50th percentile of their respective capital markets in recent years. These companies must subject each business unit and region to a TSR analysis in order to determine exactly where opportunities for improvement lie. (See Exhibit 4.)
- Boost investor engagement. To attract and retain stable, long-term-oriented investors, companies should identify the type and priorities of their natural investor. This profile should serve as the basis for a crisp, compelling, detailed investment thesis, reinforced by strengthened IR capabilities and a clear IR roadmap. The thesis should articulate a clear business strategy and outlook, a financial strategy that outlines the company’s overarching capital allocation philosophy and principles, and an investor strategy that lays out a plan for improving TSR, including a specific mix of value levers. In our experience, best-in-class IR can generate a valuation premium of at least 10%.
TSR in Action
To further understand the factors that affect TSR, companies should carry out a twofold analysis.
On the one hand, companies should adopt an empirical approach that values their business by linking the fundamentals that matter most (depending on sector) to an analysis of how those fundamentals have affected the valuation outcomes of their sector peers. We derive valuation expectations from data-driven, statistically observed relationships between such fundamentals and the market’s historical pricing of them. For automakers, the relevant fundamentals may include gross margin, capital employed, and credit rating; for banks, they may include return on tangible equity and asset growth. (See Exhibit 5.) This exercise differs sharply from a traditional investment-bank valuation, which depends on judgment, narratives, and internally built assumptions.
On the other hand, companies should use an approach that focuses on identifying the key drivers of value creation to guide them in determining what areas to focus on. This can help management clarify strategic priorities, set concrete targets and KPIs, and connect these back to business strategy. With that guidance in hand, strategists can then develop the actionable plans, resource allocation, and execution steps that align best with long-term value creation.
Next Steps
Despite the specific constraints and challenges that persist in the Greater China market, empirical evidence shows that if companies stay committed to managing their business to optimize TSR, they can consistently create value over time. The formula for value creation lies in developing and executing an integrated TSR strategy that cohesively aligns business, investor, and financial strategies.
To that end, company boards, management, and employees can take several steps to maximize TSR.
For Boards
- Create a sense of ownership among company leaders and their management teams. Encourage them to actively use TSR to create value, not simply to measure it.
- Align management incentives with TSR. Tie bonuses and stock options to TSR targets.
For Management
- Set the right strategic goals. Incorporate a TSR lens into strategic planning to ensure that business objectives and long-term shareholder value creation align.
- Challenge your current plan. Assess the performance of your business portfolio, and build an optimized plan based on a deep understanding of the internal sources of value creation in business units and regions.
- Sharpen capital allocation. Assign TSR a prominent role in determining the best uses of capital—such as organic growth, M&A, digital capabilities, and payouts—and to assess how each such use might create the greatest value.
- Ensure accountability. Hold direct reports accountable for focusing on metrics that directly support the investment thesis and drive long-term TSR.
- Treat investors as if they were customers. Understand the interests and priorities of your natural investor type; then develop a compelling investment thesis and investor engagement strategy tailored to that investor type.
For Employees
- Welcome education and communication about the importance of TSR. Companies should conduct information sessions for staff to explain TSR’s significance, and they should share details on the performance metrics that lead to improved value creation.
- Reinforce a culture of cross-functional collaboration. This orientation can help drive initiatives that positively impact TSR.
- Familiarize yourself with using AI and other technologies. Competence and confidence in working with these tools can trigger new value creation initiatives and enhance transparency throughout the organization.
Collectively, the many benefits of TSR can help companies become great: more financially resilient, better positioned for competitive advantage, increasingly profitable, and more attractive to current and prospective employees. Great companies that continue to use TSR as a management tool can become great stocks, with strong and sustainable TSR, higher valuation multiples, and a stable and loyal investor base.
The authors thank Warren Goh, Sharon Ng, and Eugene Khoo of the BCG ValueScience Center for their valuable contributions to this report and for their ongoing guidance and support on TSR topics.
