Companies that have women on their corporate boards pay less for acquisitions, according to a University of British Columbia's Sauder School of Business study released November 25.
The study found that the bid premium on an acquisition – the difference between the final offer price and the stock price of the target firms before the acquisitions were finalized – is 15.4% lower for each female director on a company's board. In addition, for every female board member, the number of a company's attempted takeover bids decreased by 7.6%.
The results reflect the fact that women are less interested in pursuing risky acquisitions and require a higher return on investment, the researchers said.
"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 study co-author Kai Li.
"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 study analyzed several acquisitions made by S&P 1500 companies in the United States over a 12-year period. The researchers looked at the difference between the final offer price and the stock price of the target firms before the acquisitions were finalized, and then correlated these values to the number of women on the boards of the involved companies.
"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," says Professor Li.
"This finding adds fire and force to recent calls to mandate a minimum number of women on the boards of publicly traded companies."
The report comes on the same day that UBC announced a $2 million gift from John Montalbano, CEO of RBC Global Asset Management and a member of the UBC Board of Governors, to the Sauder School for the creation of a professorship to promote the advancement of women and diversity in corporate leadership.
"Despite all the best intentions by the world's leading organizations, women and minorities are still not finding their way to leadership roles in acceptable numbers," says Montalbano.
"If we can solve this in Canada, it could become a competitive advantage for the country and inspire others to follow suit."
Earlier the same day, the Canadian Board Diversity Council (CBDC) published its annual report card showing that the number of women serving on corporate boards has not been growing at a significant rate. If this trend continues, said the CBDC, gender parity on corporate boards won't be reached until 2097.
