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 on it, relative to when no women sit on the board.
The underpricing effect is not attributable to differences in profitability, growth opportunities, CSR scores, CEO gender, director experience, or other firm, director, or underwriter characteristics. Instead, the underpricing effect appears to be driven by increased non-pecuniary institutional investor demand for board gender diversity over the most recent decade. Board gender diversity does not impact the initial file price of the IPO or the offer price adjustment, suggesting that institutional investors who are not invited to participate in the IPO book-building process are likely driving the underpricing effect. We find that the underpricing effect is attenuated for IPOs with underwriters that have relatively greater network centrality.
The increasing use of dual class voting structures in public companies, and the frequency with which such structures contain sunset provisions, raises...