Within China's transitioning economy, financial misallocation significantly impedes efficient corporate resource allocation, primarily driven by ownership discrimination, term mismatch, and sectoral distortion. This study integrates upper echelons theory and financial friction theory to investigate whether and how heterogeneity in the top management team (TMT)—specifically in age, education, and career background—mitigates this misallocation. Analyzing panel data from Shanghai and Shenzhen A-share listed companies (2010–2022) with a two-way fixed effects model and bootstrap mediation, we find that financial misallocation significantly inhibits total factor productivity (TFP), patent output, and return on assets. Conversely, TMT heterogeneity alleviates these negative effects by reducing information asymmetry (reflected in a 42 % decrease in the SA index) and enhancing risk-taking (evidenced by an 18 % increase in R&D intensity). This moderating effect is approximately 30 % stronger in non-state-owned enterprises and digitally advanced firms. Furthermore, the efficacy of TMT heterogeneity is context-dependent, strengthened by higher levels of market development and digitalization. This study introduces a dynamic "structure-behavior-performance" framework linking corporate governance with financial distortions, offering valuable insights for regulators and firms aiming to optimize credit allocation and TMT composition.
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