TOP MANAGEMENT TEAM HETEROGENEITY, DIVERSIFICATION, AND CORPORATE PERFORMANCE: A PANEL SMOOTH TRANSITION REGRESSION MODEL

This empirical study uses a panel smooth transition regression (PSTR) model to investigate the nonlinear relationship between top management team (TMT) heterogeneity and corporate performance based on a sample of 117 publicly traded companies in China from 2000-2012. The results show that there is a nonlinear relationship between TMT heterogeneity and corporate performance that depends on the company's degree of diversification. Specifically, when the degree of diversification is lower than the threshold of 0.5647 (i.e., when a company uses a single business or dominant business strategy), heterogeneity in education level and educational background is negatively correlated with corporate performance. When the degree of diversification is higher than the threshold of 0.5647 (i.e., when a company uses a related or unrelated diversification strategy), education-level heterogeneity and corporate performance are positively correlated, whereas age heterogeneity and corporate performance are negatively correlated.