Top management team heterogeneity and peer effects in investment decision-making: based on the social learning perspective

Purpose The purpose of this paper is to form propositions about the relationship between top management team (TMT) heterogeneity and peer effects in investment decision-making and explore the mediating role of social learning processes. Design/methodology/approach To investigate the correlations between TMT heterogeneity and investment peer effects, we considered the TMT heterogeneity category, team process and contextual factors. With a sample of 8,467 firm-year observations from Chinese listed companies, we used the mean linear model and instrumental variable method to empirically examine their relationships. To identify the mediating role of social learning processes, we introduced a social learning model to find out the contextual factors influencing corporate social learning demands from three aspects and subsequently used comparative statics analysis to explore the variations in the main effect under these contextual factors. Findings For task-oriented heterogeneity (e.g. functional background, education and tenure heterogeneity), the opposite effects of information elaboration and social categorization processes make it a nonlinear multiplex correlation with investment peer effects. For relation-oriented heterogeneity (e.g. age and gender heterogeneity), the sole effect of social categorization processes leads to a negative linear correlation. Further, we identify the mediating role of social learning processes. In summary, we established a connection from the TMT heterogeneity, to information elaboration theory or social categorization theory, to social learning processes and ultimately to investment peer effects. Originality/value The results of this study provide a comprehensive perspective to predict the decision-making outcomes of team heterogeneity and contribute to heterogeneity research and practice.