TMT Heterogeneity, Capital Structure Effect And Firm Performance

Early, the capital structure research is given priority to with static theory of capitalstructure. Until the1980s, Jalivand and Harris opened a new chapter of the capitalstructure dynamic adjustment. Then, the capital structure optimization based on thedynamic adjustment of capital structure has become a research hotspot of scholars bothat home and abroad. Most studies have shown that each enterprise has its own optimalcapital structure and inevitably deviates from its optimal capital structure when facingthe changing internal and external environment. In reality, in order to realize theenterprise value maximization and meet the needs of enterprise development strategy,enterprise will constantly adjust the capital structure to make it as much as possibleclose to the optimal level. However, the capital structure dynamic adjustment is by nomeans a simple adjustment of the capital ratio between debt and equity. Most existingresearch has only focused on whether enterprise features, industry and the macroenvironment factors have impact on the dynamic adjustment of capital structure, butignored the effect of TMT who are the direct makers of enterprise’s capital structuredecision. In the process of enterprise development, facing the complicated andchangeable financing environment, TMT how to more effectively adjust enterprise’scapital structure close to the optimal level, will affect the enterprise operatingperformance and long-term development.Based on upper echelons theory and dynamic capital structure theory, this paperselects417listed companies in China as the research object, and has a research on therelationship between TMT heterogeneities and the capital structure decision effect in2009-2012. Meanwhile, this paper chooses the heterogeneities of the listed company’sTMT age, educational background, profession and tenure as the breakthrough point ofTMT heterogeneity research, and chooses the dynamic adjustment speed and thedeviation degree of capital structure as the substitution variables of the capital structuredecision effect. Then the research shows that there is not significant relationshipbetween the age heterogeneity of the listed company’s TMT and the adjusting speed ordeviation degree of capital structure, but there is significant negative correlationbetween the educational background heterogeneity of TMT and capital structuredeviation degree, and the educational background heterogeneity of TMT possibly has apositive effect on capital structure adjustment speeds more or less, which tells us that the TMT’s educational background heterogeneity can contribute to make better capitalstructure decision for enterprises. Besides, the research also shows that the professionheterogeneity of TMT significantly accelerated the adjustment speed of capital structure,and significantly reduced the capital structure deviation degree, which tell us that theTMT with diversified professional background makes the capital structure decisionmore efficiently, and makes more optimal capital structure decision for enterprises. Inaddition, this paper also finds that the tenure heterogeneity of TMT has a significantnegative impact on the capital structure adjustment speed, and to some extent mayincrease the deviation degree from the optimal capital structure, which show that thehigh tenure heterogeneity of TMT will have some negative effect on the capitalenterprise’s structure decision-making. Further, this paper also analyzes the relationshipbetween the capital structure decision effect and the enterprise performance, and findsthat there is significantly negative correlation between the deviation degree from theoptimal capital structure and enterprise performance, which shows that the closer thecapital structure gets to the optimal level, the more benefits to the raise of enterpriseperformance. In conclusion, the research in this paper shows that TMT heterogeneitiesnot only have some impact on the capital structure decision effect, but also canindirectly affect enterprise performance through affecting capital structure optimization.The research results in this paper enrich the study on influence factors of capitalstructure dynamic adjustment, expand the dynamic capital structure theory, and to acertain extent have practical significance not only on enterprise‘s TMT building, butalso on improving the efficiency and quality of decision-making and enterpriseperformance.