Social diversity in corporate boards and firm outcomes

Suresh Bhagavatula, Manaswini Bhalla, Manisha Goel and Balagopal Vissa

Journal of Corporate Finance, 2023, vol. 83, issue C

Abstract: We examine how firm performance is associated with social diversity among corporate directors, proxied by diversity along religion and caste, a deep-rooted institution dividing India’s Hindu society into hundreds of communities. To identify directors’ social identities, we build one of the first data-driven mappings of last names to caste and religion. We find that Indian corporate boards are strikingly homogeneous (i.e. lack diversity) during 1999–2015. Using four instrumental variable strategies, we find that board homogeneity is negatively related to firm performance. We find that the negative impact of board homogeneity is due to overlapping views and networks of caste-proximate directors and cronyism impairing their monitoring and advising roles.

Keywords: Diversity; Firm performance; Corporate governance; Caste; Corporate culture (search for similar items in EconPapers)
JEL-codes: G30 L25 M14 Z13 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:83:y:2023:i:c:s0929119923001487

DOI: 10.1016/j.jcorpfin.2023.102499

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