Mediation effect of product diversification on the relationship between top management team heterogeneity and firm value in China
ISSN: 1750-614X
Article publication date: 24 January 2022
Issue publication date: 2 January 2023
Abstract
Purpose
Based on upper echelons (UE) theory, the purpose of this study is to investigate a conceptualized moderated mediation model for examining the effects of top management team (TMT) heterogeneity and firm value in China through the mediating effect of product diversification, the moderating effect of ownership type between TMT heterogeneity and product diversification and the moderating effect of executive shareholding between product diversification and firm value.
Design/methodology/approach
Unbalanced panel data were collected over 5 years with a total of 6,597 observations, organized through the WIND (Wind Economic Database) and CSMAR (China Stock Market and Accounting Research) Database. The hypotheses were tested using structural equation modeling and analyzed with stata15.0 software.
Findings
The results indicated that product diversification plays a mediating role between TMT heterogeneity and firm value. In China, TMT heterogeneity of non–state-owned enterprises plays a more significant role in promoting product diversification than that of state-owned enterprises; executive shareholding strengthens the relationship between product diversification and firm value.
Research limitations/implications
The characteristic dimension of TMT is seen as a relatively static factor, and it is worth looking at whether a more dynamic system of evaluation and measurement can be established.
Originality/value
This study enriches theoretical research on TMT and contributes to UE theory in several ways. First, we studied the mediation effect of product diversification between TMT heterogeneity and firm value. This extends research on UE theory to possible process variables. Second, considering the influence of the unique institutional environment in China on corporate strategic decisions, the study investigates state-owned and non–state-owned enterprises. Specifically, it looks at the influence of ownership type as a moderating variable between TMT heterogeneity and product diversification. Third, the paper discusses the moderating effect of executive shareholding on the product diversification–firm value relationship. The research contributes to agency theory and expands research on different economic systems by implementing agency theory.
Keywords
Acknowledgements
This work was supported by Guangxi University Humanities and Social Sciences Key Research Base – Nanling Corridor Ethnic Culture Research Base; Hezhou Foundation for Research and Development of Science and Technology(HKJ2021047); Natural Science Foundation of Fujian Province (No: 2021J05251); Science and Technology Project of Fujian Education Department (JAT200676); Foundation of Wuyi University (YJ202012, MGC201909Z).
Citation
Shen, N. and Zhuo, Z. (2023), "Mediation effect of product diversification on the relationship between top management team heterogeneity and firm value in China", Chinese Management Studies, Vol. 17 No. 1, pp. 130-151. https://doi.org/10.1108/CMS-10-2020-0462
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited