Boards With Women Members Do Better, Studies Find
The study found that the more women there are on a corporate board, the less that corporation pays for each acquisition an average of 15.4% with each female director added. Each additional female board member also reduces the number of that company's attempted takeover bids by 7.6%.
"Female board members play a significant role in mitigating the empire-building tendency of CEOs through the acquisition of other companies." said Sauder finance professor and co-author of the study Kai Li in a press release. "On average, merger and acquisition transactions don't create shareholder value, so women are having a real impact in protecting shareholder investment and overall firm performance."
According to the researchers, the results suggest women are more cautious about and therefore less likely to pursue risky transactions; they need to be guaranteed a higher return on investment before they will partake in a deal.
"Our findings show that the prudence exhibited by women directors in negotiating mergers and acquisitions has had a substantial positive effect on maintaining firm value," Li said in the press release. "This finding adds fire and force to recent calls to mandate a minimum number of women on the boards of publicly traded companies."
The study's findings, in the upcoming Journal of Corporate Finance, were the result of an analysis of a large sample of acquisition bids made by S&P 1500 companies in the United States between 1997 and 2009. To determine the cost of the acquisitions, researchers examined the difference between the final price offered for the company and the stock price of the targeted firm before the deal was signed otherwise known as the "bid premium." The bid premium was correlated to the number of women directors on the various boards.
The Sauder study adds to an already ripe discussion on the need for more women board members.
The Washington D.C.-based Committee for Economic Development released its own report last year criticizing the stagnation of female representation in U.S. boardrooms. The report lamented that women make up only between 11% to 12% of corporate board members the same as a decade ago.