Women directors and IPO underpricing: evidence from Indian markets

Abstract

Purpose– This paper aims to fill the gap of the relatively under-researched impact of women directors on initial public offering (IPO) underpricing in developing countries. Gender diversity is an important emerging issue within the corporate governance literature. Recently, there has been a growing thrust on gender-diverse boards. However, their proportion on corporate boards is low worldwide. The paper examines the influence of women directors on the underpricing phenomenon pervasive in the IPO context.Design/methodology/approach– Gender diversity is an important emerging issue within the corporate governance literature. Recently, there has been a growing thrust on gender diverse boards. However, their proportion on corporate boards is low worldwide. The impact of women directors on IPO underpricing in developing countries remains relatively under-researched. This paper aims to fill this gap in research. The paper examines the influence of women directors on the underpricing phenomenon pervasive in the IPO context.Findings– The results suggest that the subscription ratio, listing delay and block holder ownership positively influence raw returns and market-adjusted excess returns. The proportion of women directors showed negative non-significant impact on both type of returns. We did not find evidence of the other explanatory variables included in the model.Research limitations/implications– The relatively low proportion of female directors may be the reason for some of the non-significant findings. Future research with a good gender balance on boards is likely to help generalising the findings. Other confounding factors also need to be included in the model for deeper explanations of the phenomenon.Practical implications– The study highlights the existence of a “glass ceiling” in Indian corporate settings, where women have to make a tough fight. This barrier must be removed to unleash the real talent of women as directors and see this talent reflected in returns.Social implications– The paper highlights both the need to better manage the gender balance in corporate board rooms and the need to incorporate women’s talents in corporate and investment decisions.Originality/value– The paper highlights the significant gender gap in IPO directorial positions in developing countries such as India. It explores female directors’ contributions in initial pricing performance, which remain unaddressed in this part of the world. Insights into this sensitive issue in an emerging economy such as India can provide important inputs.