Top Management Team attributes and the probability of firm default

This PhD research investigates the effects of the key top management team (TMT) attributes on the probability of a firm’s default. Specifically, the study pursues motivation, loyalty and effectiveness as the key characteristics to analyse. Synthesising the Behavioural theory of the firm, Upper Echelons theory, Resource Based View, Agency theory and Seasons of tenure alongside other key TMT theories this research develops a theoretical model. The literature on TMT and financial distress has focused mostly on the role of the CEO or different definitions of the TMT, however, the role of the CFO is very rarely studied. This research argues that the role of the CFO is extremely important when a firm faces financial difficulties and is key to the definition of TMT that influence the financing decisions of the firm. In addition, this research uses both accounting based measures and market based measures for predicting the likelihood of default while a majority of the literature in this field has used either accounting based measures or market based measures. This research uses multilevel modelling on a hierarchical dataset to address some of the limitations of previous research by modelling for the variability of regression intercepts and slopes and addressing the violation of the independence assumption. Using a sample of UK listed companies, on the FTSE 100 index for the period 2013 to 2016, this research uses OLS regression, Polynomial regression, Random Intercept model and Random Intercept and Random slope models as robustness checks to test the theoretical model developed. The study concludes that there is a relationship between key TMT attributes and the likelihood of default. The effect of the attributes varies for the short-term, long-term and accounting measures of the probability of firm financial distress. The study provides models that will be key to future governance ensuring a financially healthier corporate environment.