Top management team (TMT) tenure diversity and firm performance: Examining the moderating effect of TMT average age

Abstract

Purpose

The purpose of this paper is twofold: first, to investigate the effect of top management team (TMT) tenure diversity and firm financial performance (return on equity [ROE], return on assets [ROA]), and, second, to examine the moderating effect of TMT average age between TMT tenure diversity and firm performance.

Design/methodology/approach

The paper presented results from a quantitative study of 744 TMTs in Japanese manufacturing firms. The multiple hierarchical regression analysis was used to test the hypotheses.

Findings

The results show that TMT tenure diversity had a negative and significant main effect on ROE but not ROA. Furthermore, the results also indicated that the negative relationship between TMT tenure diversity and firm performance was attenuated by having older TMTs.

Originality/value

First, this paper expands scope of research on TMT diversity, which has hitherto primarily on non-individualistic variables (such as industry setting) by examining the moderating role of an individualistic variable (TMT average age). Second, this paper extended the attempts to apply the age-related theory by considering the role from the viewpoint of group level, namely, TMT average age.

Citation

Tanikawa, T. and Jung, Y. (2016), "Top management team (TMT) tenure diversity and firm performance: Examining the moderating effect of TMT average age", International Journal of Organizational Analysis, Vol. 24 No. 3, pp. 454-470. https://doi.org/10.1108/IJOA-02-2014-0739