Does Gender Diversity on Indian Boards Impede IPO Underpricing?

Abstract

India has been endeavouring to achieve gender equality, but has failed to attain much success in the corporate sector. The male-dominated Indian corporate board clearly exhibits gender discrimination. The much-awaited move has finally come from the Indian legislators who took an audacious step towards gender egalitarianism by mandating women directors in Indian boardrooms with the advent of New Companies Act, 2013. The scenario of women involvement on Indian boards just prior to this enactment has been appraised through this study. A glimpse on the advantages accruing to the companies permitting women-led initial public offering (IPO) is explored. The impact of the presence of women directors on IPO underpricing is examined by analyzing 230 Indian companies that went public from 1 May 2007 to 31 March 2013. It was found that more than 50 per cent of the sample companies lack gender diversity and in fact employ no women directors in their boards. The results point towards the existence of women on Indian boards as mere token who fail to impede IPO underpricing. The implication for the managers of Indian companies is to pursue the global trend of female inclusion and appraise women on Indian boards from mere tokens to form a critical mass to procure the benefits of gender diversity.