Skirting the Issues

Given the increasing number of women executives in the top management teams of initial public offering (IPO) firms, the lack of female-led IPO firms is a curious fact, especially since women-owned private businesses represent almost half of the new businesses formed in the United States, with patterns of founding similar to those of male-owned businesses. This lack of female-led IPOs suggests a potentially larger problem—a gender-based capital gap for new ventures. Given the empirical evidence suggesting a positive association between the presence of female executives and firm performance, the authors test whether investor perceptions are aligned with these empirical patterns. Using a sample of MBA students, the authors construct a simulated IPO, manipulating the gender demographics of the top management team. Their results suggest that female CEOs may be disproportionately disadvantaged in their ability to attract growth capital, when all other factors are controlled. Despite identical personal qualifications and firm financials, female founders/CEOs were perceived as less capable than their male counterparts, and IPOs led by female founders/CEOs were considered less attractive investments.