The study compared the performance of the merged entities from same-caste deals with transactions done between members of different castes.
Caste plays a critical role in India's corporate sector, especially in mergers and acquisitions (M&As), a study by IIM-Bangalore has revealed.
The authors analysed information from two corporate databases (Thomson One SDC and CMIE Prowess) about deals done in corporate India from 2001-2017.
The study compared the performance of the merged entities from same-caste deals with transactions done between members of different castes.
After a year or two, merged entities from same-caste deals performed slightly worse than the companies where members of different castes teamed up.
Cultural proximity does not necessarily benefit discussions and efficiency of transactions, the study said.
"Caste proximity, measured either through varna or through jati, does not appear to have an effect on the takeover premium agreed on by the target and acquirer firms.," the study concluded.
The authors also said that lack of sufficient and transparent information makes acquirers rely on caste to make investments decisions.
