Are Women Undervalued? Board Gender Diversity and IPO Underpricing

65 Pages Posted: 12 Feb 2021 Last revised: 9 Mar 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: March 7, 2022

Abstract

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 presence of women on the board appears to create value because of a reduction in the cost of capital for these firms, driven by increased institutional investor demand for board gender diversity. We find evidence that underwriters with greater network centrality are better able to value board gender diversity, reducing the underpricing effect.

Keywords: Initial Public Offerings, 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, Are Women Undervalued? Board Gender Diversity and IPO Underpricing (March 7, 2022). INSEAD Working Paper No. 2022/10/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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HOME PAGE: http://www.raghurau.com/

Jason Sandvik

A.B. Freeman School of Business ( email )

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United States

Theo Vermaelen (Contact Author)

INSEAD - Finance ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Belgium

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