The Role of Social Proximity in Professional CEO Appointments: Evidence from Caste/Religion-Based Hiring of CEOS in India

Abstract

We test for the role of homophily in the appointments of CEOs in India by empirically examining the preference for same caste/religion CEOs by the largest firms. We find that caste/religion plays an important role in CEO selection. However, the evidence is not consistent with its use as a “taste-based preference” or “negative discrimination.” On the contrary, the evidence supports its use as a source of “information” or “positive discrimination.”

Keywords: CEO Appointments, Homophily, Social Proximity, Caste/Religion in India, Corporate Governance

JEL Classification: M10