Women on corporate boards and allocation of capital raised through IPOs

Abstract

Purpose The purpose of this paper is to examine whether the differences in men and women, such as risk aversion in decision making, can influence the amount of capital that the board of directors can allocate for investment opportunities. Design/methodology/approach This study sampled 212 IPOs over the period of 2005–2015 and employed the OLS and the quantile regression techniques to examine the impact of female directors on capital allocation. Findings The results show that women on corporate boards have a positive influence on the amount of capital an IPO company can allocate for investment opportunities. These findings suggest that the investment strategies of women in an emerging financial market, like Malaysia, may differ from women in other financial markets. Practical implications The presence of women on corporate boards plays an important role in board involvement in a company’s strategic decision at the time of the IPO. Therefore, regulators and IPO issuers should pay close attention to the corporate governance structure of a company at the time of an IPO. In addition, investors and other stakeholders of a company may consider women on corporate boards as an important factor in financing and investment decisions. Originality/value Despite several studies that have examined the influence of women on corporate boards on corporate outcomes, globally, the presence of women on corporate boards and their influence on corporate decision-making related to allocation of capital to investment opportunities, have not been fully explored in the IPO literature.

Signalling IPO quality through female directors

“…Initial public offering (IPO) is the most significant event in the lifecycle of a company, and the most common mechanism for raising non-interest bearing capital in the capital market. Capital raised through an IPO in most cases is used for pursuing growth opportunities, among others (see Badru et al, 2016Badru et al, , 2019Kim and Weisbach, 2008). However, one of the greatest puzzles created by this event is the huge initial returns (IR) that occur on the first trading day, popularly referred to as IPO underpricing [1].…”

“…A typical example is the study of Badru et al (2019), which reveals that women directors are positively associated with the allocation of capital raised for growth opportunities.…”

Target Social Media Presence and Its Effects on Acquirers’ Decision

“…Board independence is the percentage of directors who are independent. Large board and higher proportion on independent directors are expected to enhance M&A quality and performance (Badru, Ahmad-Zaluki, & Wan-Hussin, 2019;Usman, Zhang, Farooq, Makki, & Dong, 2018). CEO duality is a dummy variable indicating whether the CEO is also the board chair.…”

Board of Directors and Firm performance: the moderating effect of women directors

“…As a result, BOD could influence firm performance in many ways. Among them are corporate social responsibility (Sheela et al, 2016) and disclosure (Hussain, Rigoni & Orij, 2018;Omar & Amran, 2017), debt composition (Hussain, Ali, Thaker, & Ali, 2019) earning management (Abdullah, et al, 2018;, financial performance (Saidat, et al, 2019;Jubilee et al, 2018;Bhatt & Bhatt, 2017;Low et al, 2015), financial stability (Lassoued, 2018), investment (Badru et al, 2019), risk management (Poletti-Hughes & Briano-Turrent, 2019; Sanusi et al, 2017), stock market liquidity (Amer, Hussein, & Ali 2017), sustainability (Hussain et al, 2018), and tax aggressiveness (Kim & Zhang, 2016).…”