The Impact Of Top Management Team's Age Gap On Corporate Risk-Taking

The level of corporate risk-taking is crucial to the corporate's development.Moderate risk-taking can improve corporate's productivity and maximize corporate's value.However,excessive risk-taking can easily lead to difficulties or even bankruptcy.Among the research on the factors influencing the corporate risk-taking,the research on the characteristics of managers based on the "Upper Echelons Theory" has achieved rich results,but the research on how top management team(TMT)diversity affects corporate risk-taking is still relatively lack.Although there is little special research between TMT diversity and corporate risk-taking,the impact of TMT diversity on other aspects of corporates has been accumulated.However,the existing research confuses the positive impact of TMT diversity with the negative impact of TMT diversity,leading to unclear mechanism of action.In order to solve above problems,this paper takes the lead in introducing the dynamic decision-making mechanism of group polarization into the research on TMT diversity.This paper constructs a new indicator,"age gap",measuring the degree of opposition within TMT,and explores the impact of TMT's age gap on corporate risk-taking.Using the data of A-share listed companies in Shanghai and Shenzhen from 2006 to 2015,this paper finds that TMT's age gap has a significant positive impact on corporate risk-taking on both accounting and market dimensions,whereas TMT's age diversity indicators constructed in existing literature do not have a significant impact on corporate risk-taking.After using instrumental variables to solve endogeneity problems,the positive impact of TMT's age gap on corporate risk-taking is still significant.From the perspective of impact mechanism,the impact of TMT's age gap is due to the friction caused by TMT's age gap reducing the efficiency of decision-making and leading to the decline of effective supervision of corporate risk-taking.Further,this paper also finds that the political association of the chairman of the board,high regional cultural tolerance and low book-to-market ratio can all weaken the adverse impact of friction on corporate risk-taking.In addition,this paper also divides the specific risk behaviors of corporates into malignant risk behavior—violation and benign risk behavior—innovation.After using the partially observable Bivariate Probit model and the Tobit model respectively,this paper finds that increasing TMT's age gap will promote the tendency of violations and reduce the ability of innovation.Finally,this paper also carries out a series of robustness tests,which prove that the main conclusions of this paper are robust.By taking the lead in introducing the dynamic decision-making mechanism of group polarization,this paper enriches the research on TMT diversity and corporate risk-taking,and discusses the impact of TMT diversity on team decision-making efficiency from a new perspective.In addition,this paper has certain reference significance for how to rationally configure TMT.