Relationship between Directors’ Diversity and IPO Underpricing:Evidence from India

The present study attempts to examine the relationship between the presence of foreign directors on the board of the newly listing companies and Initial Public Offerings (IPOs) on listing day returns. Sample of 367 IPOs issued in India from 2004 to 2014 are examined and the average initial excess return which measures IPO underpricing is found to be 21 percent. Taking lead from existing literature on IPO underpricing, various board related, issue related and company related variables are examined and a significant relationship of issue size, level of subscription, and professional associations of the directors with the initial day returns is observed in this study. Furthermore, it is found that only 28% of the sample companies have foreign directors present on their board at the time of IPO. The findings imply that the presence of the foreign directors on board does not curtail IPO underpricing.