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Top Management Team Heterogeneity, Diversification, And Corporate Performance: A Panel Smooth Transition Regression Model

Author

Listed:
  • Weining LI

    (School of Business Administration, South China University of Technology Guangzhou, China.)

  • Sen ZHANG

    (School of Business Administration, South China University of Technology Guangzhou, China.)

  • Jing ZHANG

    (Library, South China University of Technology Guangzhou, China.)

Abstract

This empirical study uses a panel smooth transition regression (PSTR) model to investigate the nonlinear relationship between top management team (TMT) heterogeneity and corporate performance based on a sample of 117 publicly traded companies in China from 2000-2012. The results show that there is a nonlinear relationship between TMT heterogeneity and corporate performance that depends on the company’s degree of diversification. Specifically, when the degree of diversification is lower than the threshold of 0.5647 (i.e., when a company uses a single business or dominant business strategy), heterogeneity in education level and educational background is negatively correlated with corporate performance. When the degree of diversification is higher than the threshold of 0.5647 (i.e., when a company uses a related or unrelated diversification strategy), education-level heterogeneity and corporate performance are positively correlated, whereas age heterogeneity and corporate performance are negatively correlated.

Suggested Citation

  • Weining LI & Sen ZHANG & Jing ZHANG, 2015. "Top Management Team Heterogeneity, Diversification, And Corporate Performance: A Panel Smooth Transition Regression Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 129-142, March.
    • Handle: RePEc:rjr:romjef:v::y:2015:i:1:p:129-142
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    References listed on IDEAS

    as
    1. González, Andrés & Teräsvirta, Timo & van Dijk, Dick & Yang, Yukai, 2005. "Panel Smooth Transition Regression Models," SSE/EFI Working Paper Series in Economics and Finance 604, Stockholm School of Economics, revised 11 Oct 2017.
    2. Moon, H.R.Hyungsik Roger & Perron, Benoit, 2004. "Testing for a unit root in panels with dynamic factors," Journal of Econometrics, Elsevier, vol. 122(1), pages 81-126, September.
    3. Nielsen, Bo Bernhard & Nielsen, Sabina, 2011. "The role of top management team international orientation in international strategic decision-making: The choice of foreign entry mode," Journal of World Business, Elsevier, vol. 46(2), pages 185-193, April.
    4. Don Knight & Craig L. Pearce & Ken G. Smith & Judy D. Olian & Henry P. Sims & Ken A. Smith & Patrick Flood, 1999. "Top management team diversity, group process, and strategic consensus," Strategic Management Journal, Wiley Blackwell, vol. 20(5), pages 445-465, May.
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    Cited by:

    1. Xie, Xuemei & Han, Yuhang & Hoang, Thu Thao, 2022. "Can green process innovation improve both financial and environmental performance? The roles of TMT heterogeneity and ownership," Technological Forecasting and Social Change, Elsevier, vol. 184(C).

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    More about this item

    Keywords

    heterogeneity; diversification; corporate performance; panel smooth transition regression model; nonlinear;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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