The impact of top management team members diversity on corporations’ performance and value: evidence from emerging markets

Abstract

Abstract The study contributes to understanding the impact of top management team (TMT) member diversity on corporations’ performance and value in emerging markets. It examines three dimensions of diversity in TMT: gender, education, and foreign nationalities, providing insights into how these factors influence corporate performance and value. The study’s quantitative analysis of 70 non-financial corporations from Brazil, Egypt, India, Russia, Saudi Arabia, South Africa, and Turkey from 2013 to 2022 using cross-sectional unit analyzes helps establish empirical evidence on the relationship between TMT diversity and corporate performance in emerging markets. Study’s findings can inform corporations in emerging markets about the importance of promoting diversity in their top management teams to improve performance and value. The study found a significant impact of top management team diversity based on education and foreign nationalities but a non-significant impact on gender on some key performance indicators (KPIs). The study can explain the non-significant impact of gender according to shifting the prevailing theory from sexual selection theory to prospect theory. On the other hand, the study believes that the optimal mass of diversification, or the weight of members with diverse backgrounds, determines whether the impact of diversification is positive (it leads to increased creativity, innovation, problem-solving ability, talent attraction and retention, and employee engagement and productivity) or negative (it leads to increased organizational conflict and communication difficulties). If it is less than this mass, the benefits of diversity are limited, but if the mass is greater than it, the harms of diversity are greater than the benefits. The study also highlights the need for future research in the area of diversity in top management and provides a plan outlining steps to enhance diversity in top management teams.

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