Purpose Based on socioemotional selectivity theory, the authors aimed to develop and test hypotheses that identify the direct effect of top management team (TMT) age diversity on firms’ financial performance (return on equity [ROE], return on assets [ROA]) and the interactive effect of TMT age diversity and TMT average age on firms’ financial performance. Design/methodology/approach The paper presents results from a quantitative study of 867 TMTs in Korean manufacturing firms. Multiple hierarchical regression analysis was used to test the hypotheses. Findings The results show that TMT age diversity had a negative and significant main effect on ROE but not on ROA. They also indicate that the negative relationship between TMT age diversity and firm performance (ROE) was attenuated when the members of TMTs were relatively older. Originality/value First, this study extends existing TMT research, which mainly focuses on macro factors, such as industry and environment, by using micro factors, including TMT age diversity and TMT average age. Second, this paper combines and extends previous TMT studies, which have been dominated by either “property” or “tendency”, by examining the interactive effect of the distributional property (diversity) and central tendency (average) of TMT age on firms’ financial performance. Finally, this study indicates that socioemotional selectivity theory may be useful to explain the link between TMT age diversity and firms’ financial performance.

Top management team (TMT) tenure diversity and firm performance: examining the moderating effect of TMT average age Tomohiko Tanikawa Yuhee Jung Article information:To cite this document: Tomohiko Tanikawa Yuhee Jung , (2016),"Top management team (TMT) tenure diversity and firm performance: examining the moderating effect of TMT average age", International Journal of Organizational Analysis, Vol. 24 Iss 3 pp. -Permanent link to this document: http://dx.

Using agency theory, we explore how the CEO (as principal) and the top management team (TMT) members (as agents) interactively influence the performance of a firm. By adding performance feedback theory into agency relations, we investigate whether the interactive effect of CEO–TMT relations on firm performance differs when past firm performance is either poor or strong. Using a sample of 115 Japanese firms, our results show that the interactive effect of CEO power and TMT tenure diversity on firm performance is positive in a situation of poor past firm performance. However, in a situation of strong past firm performance, the opposite result is found. These findings imply that CEO power might play a significant role in enhancing the effectiveness of TMT diversity on firm performance when past firm performance is poor.

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