Women get better mergers and acquisitions deals
Companies pay less for their acquisitions and attract less attention from potential buyers for each woman who serves on their board, finds a new study from researchers at the University of British Columbia (UBC).
The research, conducted by UBC’s Sauder School of Business and published in the forthcoming Journal of Corporate Finance paper, shows that the cost of a successful acquisition is reduced by 15.4 percent with each female director serving on a board.
In addition, for each extra woman sitting on a board, the total number of a company’s attempted takeover bids are reduced by 7.6 percent.
The researchers claim their results suggest that women are less interested in pursuing risky transactions, and that they require the potential for or promise of a higher return on their company’s investments.
‘Female board members play a significant role in mitigating the empire building tendency of CEOs through the acquisition of other companies,’ says Kai Li, a professor of finance at Sauder 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.’
As part of the study, Li and her fellow authors – Sauder professor Maurice Levi and University of Utah’s Feng Zhang – analyzed a large sample of acquisition bids made by companies who form the S&P 1500 in the United States between 1997 and 2009.
To determine the variance in the cost of acquisitions, they examined the changing ‘bid premiums’ – the difference between the final offer price and the stock price of the targeted firm before any deals were signed. These figures were then plotted against the number of female directors who served on each company’s board at the time.
‘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 adds. ‘This finding adds fire and force to recent calls to mandate a minimum number of women on the boards of publically traded companies.’
Earlier this month, one of Canada’s largest pension schemes – the Ontario Teachers’ Pension Plan – formally asked the Ontario Securities Commission to require Toronto-listed companies to have at least three women on their boards by 2020, or face delisting from the exchange.