Valuing Soft Information: IPO Price Formation and Board Gender Diversity

56 Pages Posted: 18 Feb 2021 Last revised: 31 May 2022

See all articles by P. Raghavendra Rau

P. Raghavendra Rau

University of Cambridge

Jason Sandvik

A.B. Freeman School of Business

Theo Vermaelen

INSEAD - Finance; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: May 30, 2022


We study the relation between board gender diversity and initial public offering (IPO) price formation. We find that IPOs experience significantly greater underpricing when the firm’s board has at least one female director, relative to when no women sit on the board. The underpricing effect is not attributable to differences in profitability, growth opportunities, CSR profiles, or other firm characteristics. Instead, the underpricing effect appears to be driven by increased institutional investor demand for board gender diversity. We find evidence that underwriters with greater network centrality are better able to incorporate information about investor preferences for board gender diversity into IPO prices, reducing the underpricing effect.

Keywords: Initial Public Offerings, Information Processing, Going Public Process, Gender Diversity, Underpricing, Investment Banks, Corporate Governance, Network Centrality

JEL Classification: G24, G30, J16

Suggested Citation

Rau, P. Raghavendra and Sandvik, Jason and Vermaelen, Theo, Valuing Soft Information: IPO Price Formation and Board Gender Diversity (May 30, 2022). Available at SSRN: or

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)


Jason Sandvik

A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Theo Vermaelen

INSEAD - Finance ( email )

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33 1 60 72 42 63 (Phone)
33 1 60 72 40 45 (Fax)

European Corporate Governance Institute (ECGI) ( email )

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1000 Brussels

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