Top Management Team Diversity and Firm Performance

• Main Authors: Cheng-Liang Hsieh, 謝振良
• Other Authors: Su-Chao Chang
• Format: Others
• Language: en_US
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/16368590346925081885

碩士 === 國立成功大學 === 企業管理學系碩博士班 === 96 === What factors affect firm performance is an interesting problem in business world and is broadly discussed. To answer this question, scholars investigate issues with different perspectives. Amid all possible factors, top management team in the core of organization appeals to many researchers. Some argue that the organization theory and behavior matter, whereas others argue the agency cost theory does. Top management team with specific expertise and capability not only constructs goals and strategies which determine firms’ future competences in a dynamic environment but also set up the social network to accelerate communication between different subgroups. According to upper echelon theory, the characters of top management team form the different beliefs and behaviors in firms in two aspects. Executives as the powerful actors influence organizations’ strategies and act on the basis of their personalized interpretations of the strategic situations they face. Internal governance mechanism helps lower social conflicts in a firm, whereas external one helps find out the possible investment opportunities. Besides, monitoring mechanisms of agency cost theory also play critical roles in organization performance. On the one hand, internal monitoring mechanism decreases the information asymmetry and aligns the benefits of principals with clients. On the other hand, external monitoring mechanism forces the management to adopt practical investment and avoids potential free cash flow problems. This paper investigates the relationship between top management diversity and firm performance with a contingency approach. We use research and development ratio to pick up the examples and got 207 firms at beginning but only 75 Taiwanese electronic firms are effective for this study. Most of them are the EMS companies. Our results show that the top management homogeneity in tenure and educational background improve firm performance. Moreover, managerial equity ownership diversity and leverage level moderate the relationship between characters of top management team and firm performance.