This study aims to explore the relationship between top management team demographic characteristics and performance of commercial banks
An empirical study was conducted based on a sample of 51 representative banks in China for the period 2010-2016
(1) Commercial banks with top management teams that have less age heterogeneity have better performance; (2) commercial banks with top management teams that have more educational level heterogeneity have poorer performance; (3) commercial banks with top management teams that have a wider distribution of specialization backgrounds have better performance; (4) top management team tenure and commercial bank performance have an inverted U-shaped relationship: when the average tenure is below a certain threshold, commercial banks with top management teams that have longer average tenures have better performance, but beyond the threshold, commercial banks with top management teams that have longer average tenures have poorer performance; (5) commercial banks with top management teams that have greater tenure heterogeneity have poorer performance; (6) the political social capital possessed by the top management team and commercial bank performance have an inverted U-shaped relationship; and (7) commercial banks with top management teams that have more market social capital have better performance.
This study did not thoroughly investigate the transmission mechanism in the relationship between top management team characteristics and performance, did not analyse the characteristics of top management teams from the perspective of the characteristics of the banking sector itself, and did not include directors, supervisors, and holders of offices with Chinese characteristics – e.g., secretary of the commission for discipline inspection and full-time deputy secretary of the party committee – in the scope of investigation
when building a TMT, we must give full consideration to such factors as age, gender, educational level, tenure, and specialization background and maintain a reasonable and efficient age structure of the TMT. In the meantime, we should appropriately reduce TMT heterogeneity, especially heterogeneity of age, educational level, and tenure, so as to enhance communication and cooperation within the team and reduce decision conflicts.
Social implications (if applicable)
Using upper echelons theory and social capital theory, this dissertation analyses the relationship between TMT characteristics and firm performance of China’s commercial banks in the context of a financial market environment and institutional and cultural environment with Chinese characteristics. To some extent it serves to promote the expansion of the scope of application of these theories.
Top Management Team Characteristics, Firm Performance, Bank Performance