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Wall Street Reaction to Women in IPOs

An Examination of Gender Diversity in Top Management Teams

University of Michigan, twelbour{at}umich.edu

Cynthia S. Cycyota

U.S. Air Force Academy

Claudia J. Ferrante

U.S. Air Force Academy

The authors examine the effect of having women on the top management teams of initial public offering (IPO) firms on the organizations' short- and long-term financial performance. Looking at three different samples, the authors found that trend data indicated IPO firms were gaining in the number of women they employ in their top management teams. Using data from 534 IPO firms, results suggest one reason why the trend is growing; women appear to have a positive association with the firms' short-term performance (Tobin's Q, which is market price to book value per share), 3-year stock price growth, and growth in earnings per share. Possible reasons for the positive effect of women on performance include better innovation and problem-solving processes in more diverse top management teams and the possibility that, on average, the women on these teams are higher performers than are the men on the same teams.

Key Words: IPOs • diversity • TMT • market signaling

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