Female directors and IPO underpricing in the US

Abstract

Purpose – The purpose of this study is to explore how initial public offering (IPO) investors view female presence on boards of directors in the USA. Design/methodology/approach – This study utilizes hierarchical regression and analyzes data collected from firms undertaking their IPO’s in the USA during 1997 and 2007. Findings – The findings of this study suggest that US IPO investors react negatively to female presence on the board of directors. However, this negative effect has weakened post-Sarbanes-Oxley Act. Research limitations/implications – The results of this study may not generalize to other settings. Practical implications – Gender bias against females in the boardroom exists but appears to be weaker post-Sarbanes-Oxley. Social implications – One hurdle to greater female representation in entrepreneurial ventures in the USA may be weakening as a result of greater awareness of female director contributions to board functioning. Originality/value – First, the study represents one of the few attempts to examine the influence of female directors on organizational outcomes in IPO firms. Second, this study represents one of the first studies to consider the influence of director gender on IPO performance. Finally, this study extends extant research by examining investor reactions to female board presence. The results of this study suggest that bias against females in the boardroom may exist but appears to be weakening post-Sarbanes-Oxley. This finding indicates increasing awareness of female director contributions to board functioning on the part of IPO investors.

Effect of Composition of Board and Promoter Group Retained Ownership on Underpricing of Indian IPO firms: An Empirical Study

“…The corporate world has also contributed in giving life to this biased attitude against women by denying them their share on corporate boards, a scenario which can be seen world over but is more pronounced in India as represented by Banerji, Mahtani, Sealy, and Vinnicombe (2010) in their study on Bombay Stock Exchange (BSE) leading 100 companies (BSE 100), which shows that only a proportion of 5.4 per cent board positions were held by female directors in Indian firms which is much lower than Canada (15%), the United States (14.5%), Hong Kong (8.9%) and Australia (8.3%). Reutzel and Belsito (2015) confirmed the existence of biasness against female directors in the US IPO firms, as investors reacted negatively to their presence, but this biasness seemed to lessen with developments in corporate governance measures. Handa and Singh (2015) in their study on Indian IPO firms which went public upto 2012, while pointing their low proportion at 4.8 per cent, did not find any significant relation between female directors’ presence and underpricing.…”

“…Handa and Singh (2017) contend that listing delay represents a degree of informed demand made by investors. Previous empirical studies have also controlled age of firm for its impact on underpricing (Reutzel & Belsito, 2015; Xu et al, 2017) as Singh, Tucker and House (1986) are of the view that older firms are relatively less affected by liability of market newness. With regards to offer price, an investor invests with confidence when this price reflects the risk he is taking and will be sufficiently rewarded in future for taking this risk by realising it in capital market (Fama, 1980).…”

Gender Stereotypes and Venture Support Decisions: How Governmental Venture Capitalists Socially Construct Entrepreneurs’ Potential

“…The literature does outline, however, that women encounter credibility problems when pitching to financiers (Carter & Rosa, 1998;Hisrich & Brush, 1984;Reutzel & Belsito, 2015); are treated differently than their male counterparts by financiers; and are discouraged by financiers in the application process (Alsos & Ljunggren, 2016;Belcourt, Burke, & Lee-Gosselin, 1991;Hisrich & Brush). Leaving routines and similar sources of potential discrimination aside, scholars have suggested that gender differences when seeking access to finance may be explained by financiers' individual perceptions and practices, which unconsciously disadvantage and discriminate against female entrepreneurs Fraser, 2005;Verheul & Thurik, 2001).…”

Corporate governance and IPO underpricing: evidence from the italian market

“…Ahern and Dittmar (2012) performed an empirical analysis on the Norwegian market, concluding that the constraints imposed by quotas, requiring a certain level of involvement of female directors, had a negative impact on firms' stock value. Reutzel and Belsito (2015) proved that the presence of female directors in boardrooms is seen as a negative feature by investors, and as it increases, underpricing becomes accordingly higher. For this reason, firms with high gender diversity on their BoDs found it more difficult to sell their first issued shares at a high price.…”