Women on boards cut costs of M&A: study

Women aren’t as driven by corporate mergers and acquisitions as men, which makes them better at protecting shareholder value, a new study suggests.

Research conducted at the University of British Columbia’s Sauder School of Business shows deal costs drop by 15.4 per cent for every female director on the board making the M&A decision.

The study also found that every extra female director on the board reduces the number of a company’s attempted takeover bids by 7.6 per cent.

The report’s claim is that women directors help create shareholder value through their influence on acquisition decisions because they are “less acquisitive” and have “lower overconfidence.”

“Female board members play a significant role in mitigating the empire-building tendency of CEOs through the acquisition of other companies.” says Sauder finance professor Kai Li, who co-authored the study.

“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.”

The findings are the latest in a growing list of reports championing the benefit of have more women in the boardroom. They also come amid growing calls for those numbers to increase, in some cases through legislation that forces companies to have female quotas.

The Ontario Securities Commission is pushing for legislation that requires companies on the Toronto Stock Exchange report back on how they plan to increase the number of women on boards. The Ontario Teachers’ Pension Plan is recommending stronger action, including a requirement that all TSX-listed companies have a minimum of three women on their board of directors by 2020, or else be delisted.

The Association of Chartered Certified Accountants is also calling on Canadian public companies to adopt a rule ensuring 30 per cent of their board members are women. The so-called “30-per-cent rule” for certain boards is being adopted by countries such as Germany, while Norway has a law in place since 2003 requiring at least 40 per cent of its publicly listed companies include women members.

Studies have shown more gender diverse companies achieve better financial results, including return on sales, return on invested capital and return on equity.

Still, the number of women in middle and senior management roles has stalled over the past 20 years, a recent report from the Conference Board of Canada says.

Another report from Ranstad Canada argues women are preventing their own career advancement by focusing on what they can’t have when they should be fighting for what they want.

The Sauder study, published in the Journal of Corporate Finance, analyzed acquisition bids made by 450 U.S public companies between 1997 and 2009.

Researchers looked at the bid premium, which is the final offer price and how much the stock of the targeted firm was worth before the deal was signed, and compared it to the number of women directors on those boards.

Li says the findings adds “fire and force to recent calls to mandate a minimum number of women on the boards of publicly traded companies.”