Cultural diversity in corporate boards and firm outcomes

Abstract

Using self-reported religions, castes and last names from Indian matrimonial websites and machine learning methods, we map individuals’ last names to progressively finer levels of cultural identity. Using this mapping, we show that Indian corporate boards have systematically low cultural diversity over 1999-2015, however finely we measure identity. Greater board diversity accompanies better firm quality and governance. Causal analysis shows that lack of diversity on boards worsens firm performance, with strongest results for the finest measure of identity. Our findings demonstrate people?s desire to associate with those who share their cultural identity, even in economically important settings, with detrimental effects.