Cultural homophily in corporate boards and firm

Description

We show that the boards of directors of large Indian firms are characterized by high levels of cultural proximity, with members predominantly belonging to the same religion or caste. Using a unique dataset on self-reported religion and caste from matrimonial websites, we develop a novel methodology to probabilistically map individuals’ last names to their likely religion and caste. We also construct a homophily index to measure the degree of cultural proximity among board members. Our results reveal little evidence of an increase in cultural diversity on corporate boards during the period 1999–2012, although modest heterogeneity exists across firms, sectors, and states. We find that better-performing firms tend to have more diverse boards, and that board diversity increased in sectors and states experiencing higher output growth. Further analysis indicates that a lack of diversity on boards is causally associated with lower firm performance.

Publication Date

1-1-2018

Publisher

Indian Statistical Institute, New Delhi

Keywords

Corporate culture, Corporate governance, Boards of directors, Caste

Conference

14th Annual Conference on Economic Growth and Development, Indian Statistical Institute, New Delhi

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