IPO Price Formation and Board Gender Diversity

59 Pages Posted: 12 Feb 2021 Last revised: 15 Jun 2023

See all articles by P. Raghavendra Rau

P. Raghavendra Rau

University of Cambridge

Jason Sandvik

Eller College of Management, University of Arizona

Theo Vermaelen

INSEAD - Finance; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: June 6, 2023


In January 2020, Goldman Sachs announced that it would no longer underwrite the IPOs of firms with all-male boards, stating that gender-diverse board firms outperform non-diverse board firms. Using a sample of IPOs from 2000–2018, we find that IPOs experience significantly greater first trading day returns (i.e., greater underpricing) when the firm’s board has at least one female director on it, relative to when no women sit on the board. We do not, however, find that gender diverse board firms have significantly different short- or long-run performance after the first trading day. We find evidence that the underpricing effect is driven by increased institutional investor demand for board gender diversity over the most recent decade. Board gender diversity is unrelated to the offer price adjustment made before the issue date, suggesting that no partial price changes occur to incorporate investor preferences for gender diversity into the final offer price. Instead, we find that the underpricing effect is attenuated for IPOs with well-connected underwriters, which suggests that the underpricing effect may be due to an early unawareness of investors’ preference for board gender diversity.

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, IPO Price Formation and Board Gender Diversity (June 6, 2023). INSEAD Working Paper No. 2023/27/FIN, European Corporate Governance Institute – Finance Working Paper No. 756/2021, Available at SSRN: https://ssrn.com/abstract=3783771 or http://dx.doi.org/10.2139/ssrn.3783771

P. Raghavendra Rau

University of Cambridge ( email )

Cambridge Judge Business School
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Jason Sandvik

Eller College of Management, University of Arizona ( email )

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Theo Vermaelen (Contact Author)

INSEAD - Finance ( email )

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