Top Management Team Demographic Faultlines, Firm Visibility and Firm Acquisition Activity in China

This study examines how top management team (TMT) demographic faultlines hamper acquisition activities (both intensity and quantity) of the Chinese firms from a stakeholder perspective. While previous literature on the relationship between TMT composition and firm acquisition activity mainly focuses on the managerial decision-making processes, we introduce an external stakeholder perspective. That is, TMT demographic faultlines leading to conflicts and disintegration among top managers dampen the firm's social cognitive legitimacy, thereby incurring less stakeholder support for the acquisition. As a result, acquisition activity of the firm would be mitigated. Visibility of the firm (advertisement spending, reputation, institutional ownership and prestige TMT) exaggerates the faultline effects because TMT conflicts and disintegration, once uncovered by external audiences such as the target firms and financial institutions, would make them withdraw their supports to the acquisition. Using 945 publicly listed Chinese firms across 12 years as the sample, we provide supports for our arguments.