The influence of top management team traits on corporate financial performance in the US

• Author: Karima Dhaouadi
• DOI: http://doi.org/10.1002/cjas.1288
• Published date: 01 September 2014
• Date: 01 September 2014

The influence of top management team traits on

corporate financial performance in the US

Karima Dhaouadi

Cité Universitaire de la Manouba

Abstract

This article aims to study the effect of human capital on the

f‌inancial performance of the most admired American f‌irms.

Human capital is measured in terms of the demographic

attributes and the diversity of top managers. The use of

panel linear multiple regressions reveals that the most

successful f‌irms are characterized by coherent and

homogeneous top management teams with moderate tenure

and excellent wages. Moreover, the heterogeneity of

managers is recommended for fairly young top management

teams and for larger f‌irms operating in a turbulent environ-

ment. Copyright © 2014 ASAC. Published by John Wiley &

Sons, Ltd.

Keywords: top management team, performance, demographic

attributes, heterogeneity, human capital

Résumé

Cet article examine l’effet du capital humain sur la performance

f‌inancière des f‌irmes américaines les plus réputées. Le capital

humain est mesuré par les traits démographiques et la diversité

des dirigeants. Le déploiement des régressions linéaires multi-

ples en panel montre que les f‌irmes les plus performantes sont

dirigées par des équipes dirigeantes cohérentes, homogènes, à

ancienneté modérée et bien rémunérées. De plus, l’hétérogénéité

des dirigeants est recommandée dans les équipes dirigeantes

plus ou moins jeunes et dans les plus grandes f‌irmes opérant

dans un environnement turbulent. Copyright © 2014 ASAC.

Published by John Wiley & Sons, Ltd.

Mots-clés : équipe dirigeante, performance, attributs

démographiques, hétérogénéité, capital humain

This paperfollows the framework identifyingmotivations

that form the basis of performance differences between f‌irms.

Seminal researchhas postulated that the source of competitive

advantage is external. However, more recently, the resource-

based view (RBV) has demonstrated that the source of

competitive advantage is more likely internal. As a result,

internal resourcesand tangible goods were deemed to guaran-

tee a f‌irm’s prosperity. However, the reality today is much

different because what determines corporate performance is

more immaterial. These intangible resources are primarily

composed of the f‌irm’s intellectual capital. It is diff‌icult to

assign a standardizeddef‌inition to intellectual capital, because

it is a new domain with a proliferationof proposed typologies.

In this respect, Edvinsson (1997) has established a binary

typology distinguishing “thinking”intellectual capital from

“nonthinking”intellectual capital (i.e., human capital from

structural capital). This research focuses on human capital,

which represents a major asset in this new economic era

marked by the emergence of knowledge-based companies.

Human capital takes the form of skills, attitudes, and individuals’

intellectual agility.

There are two ways to identify human capital:

1. Select top manage ment’s demographic traits as human

capital indicators in accordance with the upper echelons

theory (UET) of Hambrick and Mason (1984) and in line

with numerous previous works (Goll, Johnson, &

Rasheed, 2008; Jaw & Lin, 2009; Srivastava & Lee,

2008). This selection is justif‌ied by the demographic

indicators’relevance and uniqueness in the absence of

any other rich objective measurements.

2. Select the top management team (TMT) as the f‌ield of

research in accordance with the majority of previous

works considering the TMT as the most dominant

coalition for which member diversity affects organiza-

tional eff‌iciency (Finkelstein, Hambrick, & Cannella,

2009).

This paper differs because the top management theme is

characterized by two waves of research: remuneration

Please note that this paper was submitted and accepted in French and then

translated, as per CJAS translation policy.

Please address correspondence to: Karima Dhaouadi, Docteur, Maitre -

Assistante et Chercheur en Sciences de Gestion, Institut Supérieur de

Comptabilité et d’Administration des Entreprises, Cité Universitaire de la

Manouba, 2010, Tunisie. E-mail: dkarima76@yahoo.fr

Canadian Journal of Administrative Sciences

Revue canadienne des sciences de l’administration

31: 200–213 (2014)

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/CJAS.1288

Can J Adm Sci

31(3), 200–213 (2014)Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd. 200