Correlations between Construction Firm Value and Top Management Characteristics

Abstract

A company’s key decision-making and management strategies are developed by the top management team (TMT), whose demographic characteristics may have direct and indirect influences on firm performance. This study analyzes the relationships between TMT characteristics and firm performance in the construction industry using the TMT’s demographic data (tenure, education, age, major, function, and specialization) and accounting metrics. For this purpose, descriptive statistical analyses and verification of six hypotheses concerning their correlations were conducted for 36 South Korean construction companies. Significant correlations were rarely found between the characteristics of the TMT and firm performance when all samples were analyzed, given the wide variety of characteristics. However, significant findings were nevertheless obtained using a cluster analysis of the construction capability evaluation ranking separated by group. These findings could be used as a foundation for forming a more effective TMT that better accords with their particular company size or characteristics and can further optimize the strategic direction of an individual’s career path for both employees and managers of construction companies.