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The effects of top management team strategic cognition on corporate financial health and value: an interactive multi-dimensional approach

Attah-Boakye, Rexford; Costanzo, Laura A.; Guney, Yilmaz; Rodgers, Waymond

Authors

Rexford Attah-Boakye

Laura A. Costanzo

Yilmaz Guney



Abstract

The upper echelons theory posits that the values, personalities, experience and education background of the top management team (TMT) affect both executives’ strategic cognition and corporate outcomes. Since TMT members differ in their cognitive structures, as also acknowledged by the presence of managerial biases and irrationalities in the behavioural finance theories, policy makers and scholars are saddled with the problem of identifying specific cognitive elements that can secure optimum organisational outcomes. Conceptual approaches or linear relationships between TMT strategic cognition (TMT-SC) and outcomes are unable to capture the complex interdependencies among TMT-SC, TMT attributes and performance. We propose and empirically test a dynamic multi-dimensional TMT-SC model. Using handpicked UK company panel data, we provide robust empirical evidence that extends our understanding of the theory. Our PLS-SEM analyses show that heterogeneity in TMT academic and professional qualifications, and work experience alone cannot provide optimal benefits to organisations. However, when they are combined with other TMT cognitive factors such as social networking, innovativeness and risk-taking levels, these aspects appear to improve firm value and financial health.

Citation

Attah-Boakye, R., Costanzo, L. A., Guney, Y., & Rodgers, W. (in press). The effects of top management team strategic cognition on corporate financial health and value: an interactive multi-dimensional approach. The European journal of finance, https://doi.org/10.1080/1351847X.2021.1977360

Journal Article Type Article
Acceptance Date Aug 26, 2021
Online Publication Date Sep 15, 2021
Deposit Date Sep 28, 2021
Publicly Available Date Mar 28, 2024
Journal European Journal of Finance
Print ISSN 1351-847X
Electronic ISSN 1466-4364
Publisher Routledge
Peer Reviewed Peer Reviewed
DOI https://doi.org/10.1080/1351847X.2021.1977360
Keywords Firm solvency and value; Risk appetite; Human capital; Strategic cognition; Upper echelons theory; Behavioural finance
Public URL https://hull-repository.worktribe.com/output/3842320

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