IDEAS home Printed from https://ideas.repec.org/a/wly/buseth/v34y2025i4p2321-2338.html

Birds of a Feather Flock Together: The Impact of Top Management Team Faultlines on Environmental, Social, and Governance Performance

Author

Listed:
  • Hai Huang
  • Shengbin Hao

Abstract

While theory and research indicate that top management team (TMT) attributes play a crucial role in shaping responsible practices, how and when TMT faultlines affect environmental, social, and governance (ESG) performance remains an open question. This study aims to fill this research gap by integrating social categorization theory with the faultline literature. Using a sample of Chinese listed firms over a 12‐year period, our findings indicate that TMT faultlines can significantly inhibit ESG performance, and managerial myopia is the primary channel through which the negative effect operates. In addition, our study reveals that negative attainment discrepancy significantly amplifies the inhibitory effect of TMT faultlines on ESG performance. Intriguingly, this inhibitory effect is mitigated in firms with strong Confucian culture. Our study also reveals variations in the impact of TMT faultlines on ESG performance concerning the type of faultlines and the level of industry competition. These findings not only contribute to the literature on TMT faultlines and upper echelons but also provide valuable guidance for managers in adeptly navigating the dynamics of TMT composition.

Suggested Citation

  • Hai Huang & Shengbin Hao, 2025. "Birds of a Feather Flock Together: The Impact of Top Management Team Faultlines on Environmental, Social, and Governance Performance," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 34(4), pages 2321-2338, October.
    • Handle: RePEc:wly:buseth:v:34:y:2025:i:4:p:2321-2338
    DOI: 10.1111/beer.12767
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/beer.12767
    Download Restriction: no
    File URL: https://libkey.io/10.1111/beer.12767?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jinchi Liu & Xiong Xiong & Ya Gao & Jin Zhang, 2023. "The impact of institutional investors on ESG: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S2), pages 2801-2826, June.
    2. Nollet, Joscha & Filis, George & Mitrokostas, Evangelos, 2016. "Corporate social responsibility and financial performance: A non-linear and disaggregated approach," Economic Modelling, Elsevier, vol. 52(PB), pages 400-407.
    3. Rongjia Su & Dianjie Liang & Weili Teng, 2023. "The impact of Confucianism, Taoism, and Buddhism on CSR practices in family businesses in China," Asian Business & Management, Palgrave Macmillan, vol. 22(4), pages 1394-1417, September.
    4. Sherry M.B. Thatcher & Karen A. Jehn & Elaine Zanutto, 2003. "Cracks in Diversity Research: The Effects of Diversity Faultlines on Conflict and Performance," Group Decision and Negotiation, Springer, vol. 12(3), pages 217-241, May.
    5. Hong Ren & Barbara Gray & David A. Harrison, 2015. "Triggering Faultline Effects in Teams: The Importance of Bridging Friendship Ties and Breaching Animosity Ties," Organization Science, INFORMS, vol. 26(2), pages 390-404, April.
    6. Banjo Roxas & Alan Coetzer, 2012. "Institutional Environment, Managerial Attitudes and Environmental Sustainability Orientation of Small Firms," Journal of Business Ethics, Springer, vol. 111(4), pages 461-476, December.
    7. Hermann Achidi Ndofor & David G. Sirmon & Xiaoming He, 2015. "Utilizing the firm's resources: How TMT heterogeneity and resulting faultlines affect TMT tasks," Strategic Management Journal, Wiley Blackwell, vol. 36(11), pages 1656-1674, November.
    8. Lin, Yongjia & Fu, Xiaoqing & Fu, Xiaolan, 2021. "Varieties in state capitalism and corporate innovation: Evidence from an emerging economy," Journal of Corporate Finance, Elsevier, vol. 67(C).
    9. Xingqiang Du, 2015. "Does Confucianism Reduce Minority Shareholder Expropriation? Evidence from China," Journal of Business Ethics, Springer, vol. 132(4), pages 661-716, December.
    10. Bing Qi & Zhilin Yang, 2022. "Board Group Faultlines, Slack Resource, and Corporate Carbon Performance," Sustainability, MDPI, vol. 14(20), pages 1-21, October.
    11. Rodrigo Basco & Giovanna Campopiano & Andrea Calabrò & Sascha Kraus, 2019. "They Are Not All the Same! Investigating the Effect of Executive versus Non‐executive Family Board Members on Firm Performance," Journal of Small Business Management, Taylor & Francis Journals, vol. 57(S2), pages 637-657, November.
    12. Kumar, Alok & Page, Jeremy K. & Spalt, Oliver G., 2011. "Religious beliefs, gambling attitudes, and financial market outcomes," Journal of Financial Economics, Elsevier, vol. 102(3), pages 671-708.
    13. Saeed Janani & Ranjit M. Christopher & Atanas Nik Nikolov & Michael A. Wiles, 2022. "Marketing experience of CEOs and corporate social performance," Journal of the Academy of Marketing Science, Springer, vol. 50(3), pages 460-481, May.
    14. Christine Mallin & Giovanna Michelon & Davide Raggi, 2013. "Monitoring Intensity and Stakeholders’ Orientation: How Does Governance Affect Social and Environmental Disclosure?," Journal of Business Ethics, Springer, vol. 114(1), pages 29-43, April.
    15. Panpan Fu & Seema Wati Narayan & Olaf Weber & Yonggang Tian & Yi-Shuai Ren, 2022. "Does Local Confucian Culture Affect Corporate Environmental, Social, and Governance Ratings? Evidence from China," Sustainability, MDPI, vol. 14(24), pages 1-18, December.
    16. Orlando Curtae' Richard & Jie Wu & Livia Anna Markoczy & Yunhyung Chung, 2019. "Top management team demographic‐faultline strength and strategic change: What role does environmental dynamism play?," Strategic Management Journal, Wiley Blackwell, vol. 40(6), pages 987-1009, June.
    17. Oli R. Mihalache & Justin J. J. P. Jansen & Frans A. J. Van Den Bosch & Henk W. Volberda, 2012. "Offshoring and firm innovation: The moderating role of top management team attributes," Strategic Management Journal, Wiley Blackwell, vol. 33(13), pages 1480-1498, December.
    18. Po Ip, 2009. "The Challenge of Developing a Business Ethics in China," Journal of Business Ethics, Springer, vol. 88(1), pages 211-224, April.
    19. Joyce Rupert & Astrid C. Homan & Karen A. Jehn & Robert Jan Blomme, 2019. "Diversity Composition and Team Learning: The Moderating Role of Error Culture," Group Decision and Negotiation, Springer, vol. 28(4), pages 695-722, August.
    20. Jihae You & Taekjin Shin & Yunhyung Chung, 2023. "Can powerful allies protect the CEO against performance declines? The role of the CEO's subgroup power in CEO dismissal," Strategic Management Journal, Wiley Blackwell, vol. 44(11), pages 2818-2830, November.
    21. Bertolt Meyer & Meir Shemla & Jia Li & Jürgen Wegge, 2015. "On the Same Side of the Faultline: Inclusion in the Leader's Subgroup and Employee Performance," Journal of Management Studies, Wiley Blackwell, vol. 52(3), pages 354-380, May.
    22. Qin Han & Jennifer E Jennings & Runjuan Liu & P Devereaux Jennings, 2019. "Going home and helping out? Returnees as propagators of CSR in an emerging economy," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(6), pages 857-872, August.
    23. Katerina Bezrukova & Karen A. Jehn & Elaine L. Zanutto & Sherry M. B. Thatcher, 2009. "Do Workgroup Faultlines Help or Hurt? A Moderated Model of Faultlines, Team Identification, and Group Performance," Organization Science, INFORMS, vol. 20(1), pages 35-50, February.
    24. Nicola Breugst & Holger Patzelt & Dean A. Shepherd, 2020. "When is Effort Contagious in New Venture Management Teams? Understanding the Contingencies of Social Motivation Theory," Journal of Management Studies, Wiley Blackwell, vol. 57(8), pages 1556-1588, December.
    25. Wan, Yang & Hong, Ziyi & Liu, Wenqing & Cui, Jiashuo, 2023. "Executives’ education: A catalyst for enhanced ESG disclosure," Finance Research Letters, Elsevier, vol. 58(PB).
    26. Stephen J. Smulowitz & Didier Cossin & Hongze Lu, 2023. "Managerial Short-Termism and Corporate Social Performance: The Moderating Role of External Monitoring," Journal of Business Ethics, Springer, vol. 188(4), pages 759-778, December.
    27. Cellarier, L.L., 2023. "Flexible time horizon planning, learning and aggregate fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 268-291.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Feng Wei & Yongjun Mo & Yi Zhang & Yi Yang, 2025. "How entrepreneurial team informational and social category faultlines affect new venture performance: A conservation of resources perspective," Asia Pacific Journal of Management, Springer, vol. 42(3), pages 1345-1372, September.
    2. Hai Huang & Shengbin Hao, 2025. "Enterprise digital transformation and sustainable development performance: The asymmetric roles of top management team faultlines," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(2), pages 1670-1685, April.
    3. Hai Huang & Shengbin Hao & Yu Chen, 2023. "The more the better? Service transition for shaping sustainable development in manufacturing firms and the role of top management team attributes," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3255-3270, November.
    4. Yuefan Sun & Jidong Zhang & Jing Han & Qi Zhang, 2023. "The impact of top management teams' faultlines on organizational transparency―Evidence from CSR initiatives," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 32(4), pages 1262-1276, October.
    5. Wang, Kui & He, Junjia & Zhang, Xiaodan & Xiang, Diandian & Zhang, Ping, 2025. "Unraveling the performance puzzle of digital transformation: The moderating role of TMT heterogeneity and faultline strength," Journal of Business Research, Elsevier, vol. 188(C).
    6. Yun Song & Hongqu He & Caiyu Yan, 2022. "Impacts of top management team fault‐line on firm's innovation—Financial slack over‐investment and underinvestment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3348-3360, December.
    7. Myung-Ho Chung & Yumi Ko & Jee-Young Kim, 2020. "Group power structure, inter-subgroup cross-dependency, and work group performance," Asia Pacific Journal of Management, Springer, vol. 37(1), pages 297-323, March.
    8. Xuejiao Ma & Xiaojun Ma & Wei Fei & Qichuan Jiang & Yiwei Zhang, 2026. "Stop Where it Should Stop: Board Faultlines, Stakeholder Supervision and Greenwashing Behaviors of Firms," Journal of Business Ethics, Springer, vol. 203(2), pages 313-340, January.
    9. Shuai Chen & Duanxu Wang & Yun Zhou & Ziguang Chen & Daoyou Wu, 2017. "When too little or too much hurts: Evidence for a curvilinear relationship between team faultlines and performance," Asia Pacific Journal of Management, Springer, vol. 34(4), pages 931-950, December.
    10. Ulrich Leicht‐Deobald & Hendrik Huettermann & Heike Bruch & Barbara S. Lawrence, 2021. "Organizational Demographic Faultlines: Their Impact on Collective Organizational Identification, Firm Performance, and Firm Innovation," Journal of Management Studies, Wiley Blackwell, vol. 58(8), pages 2240-2274, December.
    11. Li, Kaili & Liu, Renjing & Dong, Jiamin & Li, Yi, 2025. "Rethinking the top management team demographic faultlines–firm performance relationship: The roles of TMT temporal stability and TMT hierarchical differentiation," Journal of Business Research, Elsevier, vol. 196(C).
    12. Elshandidy, Tamer & Bamber, Matthew & Omara, Hossam, 2024. "Across the faultlines: A multi-dimensional index to measure and assess board diversity," International Review of Financial Analysis, Elsevier, vol. 93(C).
    13. Chao Pan & Xin Su & Xi Zhong, 2025. "Not all faultlines are created equal: The heterogeneous impact of TMT faultlines on a firm's ESG disclosure," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 34(2), pages 489-506, April.
    14. Alyson Meister & Sherry M.B. Thatcher & Jieun Park & Mark Maltarich, 2020. "Toward A Temporal Theory of Faultlines and Subgroup Entrenchment," Journal of Management Studies, Wiley Blackwell, vol. 57(8), pages 1473-1501, December.
    15. Shan Li & Shiyi Tang & Yuxin Zhao & Liang Han & Wan Liu, 2024. "Curse or blessing? Impact of the scope and duration of negative attainment discrepancy on ESG practices," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(6), pages 5236-5259, November.
    16. Andrea Calabrò & Rosalia Santulli & Mariateresa Torchia & Carmen Gallucci, 2021. "Entrepreneurial Orientation and Family Firm Performance: The Moderating Role of TMT Identity-Based and Knowledge-Based Faultlines," Entrepreneurship Theory and Practice, , vol. 45(4), pages 838-866, July.
    17. Li, Weiwen & Lau, Dora Chi-sun & He, Ai & Li, Xiaotong, 2025. "Top management team faultline size and family firm performance," The British Accounting Review, Elsevier, vol. 57(4).
    18. Zhang, Yue & Wei, Xuhua, 2026. "Divided we transform? Top executive team faultlines and digital transformation in family firms," Technology in Society, Elsevier, vol. 84(C).
    19. de Haan, J. & Hermes, C.L.M. & Postma, T.J.B.M. & Veltrop, D.B., 2012. "A tale of two factions," Research Report 12001-HRM&OB, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    20. Shujun Chao & Shanyong Wang & Haidong Li & Shu Yang, 2023. "The power of culture: Does Confucian culture contribute to corporate environmental information disclosure?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2435-2456, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:buseth:v:34:y:2025:i:4:p:2321-2338. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://onlinelibrary.wiley.com/journal/26946424 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.