TMT Diversity and the Financial Performance of Listed Chinese Companies: Three-Way Interaction Analysis of Innovativeness and Government R&D Subsidies

This study investigates how the functional diversity of top management teams (TMTs) affects the financial performance of A-share Chinese companies. To this end, we examine the interaction effects of TMT diversity with organizational innovativeness and government institutional support. Grounded in upper echelons theory, absorptive capacity theory, and institutional theory, this study uses hierarchical multiple regression to analyze data from 396 firms listed on the Shanghai and Shenzhen stock exchanges between 2022 and 2023. The results indicate that TMT functional diversity has a statistically significant positive effect on corporate financial performance, with organizational innovativeness positively moderating this relationship. This moderating effect is further strengthened by high government subsidies for research and development, confirming a three-way interaction effect among these three variables. The findings suggest that TMT diversity improves financial outcomes when firms have both robust internal innovation and external institutional support. By confirming the strategic significance of TMT composition in China and elucidating the effect of government subsidies, this study contributes both practically and theoretically to the strategic management literature on emerging markets. The findings clarify the implications of the contingent conditions under which TMT diversity translates into superior organizational performance.