Dynamic capabilities as an enabling mechanism: Top management team heterogeneity and M&A performance

• TMT heterogeneity has a significant positive effect on corporate M&A performance. • Dynamic capabilities and internal compensation gaps are the potential pathways. • The value of TMT heterogeneity in M&A contexts varies across different conditions. This study takes Chinese A-share listed companies as its research sample to empirically examine the impact of top management team (TMT) heterogeneity on corporate merger and acquisition (M&A) performance. The findings reveal that TMT heterogeneity exerts a significant positive influence on M&A performance. This enhancement effect is primarily realized through the strengthening of corporate dynamic capabilities. Further analysis of moderating effects indicates that internal pay disparity weakens the positive effect of TMT heterogeneity, whereas high financing efficiency provides crucial resource support, thereby strengthening this positive relationship. Heterogeneity analysis shows that the value-creating effect of TMT heterogeneity in M&As is more pronounced in firms with higher cost of equity capital, abundant slack resources, and higher ownership concentration.