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.