How TMT Power Adjustments and Stability Preferences Influence Firm Performance in the Chinese Corporate Context

This study aims to systematically examine how Top Management Team (TMT) power structure influences firm performance within China's high-power-distance cultural context, and to critically reexamine the cultural contingency of Structural Adaptation Theory by investigating the dual effects of power centralization and the performance consequences of structural change. Drawing on institutional theory and Structural Adaptation Theory, we conduct a longitudinal analysis of Chinese A-share listed companies from 2019 to 2023. Our analysis reveals that power centralization exerts a dual effect on firm performance: it significantly enhances short-term operational efficiency, while simultaneously suppressing long-term market valuation. More importantly, we identify a pronounced stability preference effect—regardless of whether power structure adjusts toward centralization or decentralization, greater change magnitude consistently generates negative performance consequences. This finding challenges the assumption of Structural Adaptation Theory that decentralization represents a natural "entropy-increasing" process. In the Chinese context, maintaining the status quo becomes the organization's spontaneous "natural state," while any structural adjustment, irrespective of direction, becomes an "entropy-decreasing" process requiring substantial organizational energy. These effects are significantly moderated by regional culture, ownership type, and industry sector, with northern regions, state-owned enterprises, and non-high-tech industries exhibiting weaker negative effects of power structure change. This study provides a novel theoretical contribution by revealing that the directional definition of "entropy increase" versus "entropy decrease" is itself a cultural construction. It demonstrates how, within China's cultural context, the logic of Structural Adaptation Theory undergoes a critical reversal. By identifying "stability preference" as a key boundary condition, this research extends the theory's applicability and offers a more culturally inclusive analytical framework. The study also achieves cross-level theoretical integration, linking macro-level institutional factors, meso-level contextual factors, and micro-level governance mechanisms.