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Deal on the table? Better have a female executive on your team

Deal on the table? Better have a female executive on your team

Women are more likely than men to ask for directions, studies have shown, which means less wasted time and fuel driving around in circles convinced they’re on the right track.

The same logic appears to apply to men and women in the boardroom around deciding the right move to make with mergers and acquisitions.

A joint study from the University of British Columbia and the University of Utah shows corporate boards that include women are more likely to seek help from investment bankers and/or financial advisers when faced with a takeover offer. The result is less risk of backlash and even litigation from unhappy shareholders.

“Women do make a difference in business,” states the report, co-authored by Maurice Levi and Kai Li, finance professors at UBC’s Sauder School of Business and Feng Zhang, assistant professor at the David Eccles School of Business at the University of Utah (and former UBC student).

In an interview, Li said the study was done amid growing calls around the world for more women in leadership roles and on corporate boards.

“It’s important to find out the implications of having more women involved in the corporate decision-making process,” Li said.

The study looked at more than 2,500 M&A deals between 1997 and 2010, and found no change in boards looking for financial advice when the company was making a takeover offer. However, when it studied close to 500 M&A deals where the company was facing a takeover bid, over the same 13-year period, the results showed higher female board representation increased the likelihood of the board consulting with a top-ranked investment banking or financial advisor.

A 10-per-cent increase in female directors on a target board led to a 7.6-per-cent increase in the likelihood of a firm seeking financial advice, the study shows. It cites less overconfidence from women, versus men, which makes them more inclined to seek expert advice.

“We conclude that gender diversity on boards, not independence of boards, matters more in seeking high-quality financial advice,” the report says.

“Diversity in the corporate boardroom is important for shareholders,” added Li.

The report follows another CUB study Li released in the fall of 2013 showing women are better at protecting shareholder value because they’re less driven by dealmaking. It showed deal costs drop by about 15 per cent for every female director on the board making an M&A decision. For every female director on the board, the number of attempted takeover bids a company makes falls by nearly 8 per cent.

The findings are part of a growing body of evidence showing the advantages of having women in executive positions and on corporate board.

Women hold 20.8 per cent of S&P/TSX 60 board seats in Canada, according to a recent report from Catalyst.

“We have evidence and optimism that closing the gender gap on corporate boards is possible, yet the current numbers are simply not good enough,” Catalyst president and CEO Deborah Gillis stated in releasing the findings earlier this year.

“Companies that are not making diversity on boards a priority should be embarrassed. Smart leaders know that they can either lead the movement toward making profound and lasting impact, or be left behind. The way of the past is not the way of the future.”

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