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The more women on a corporate board the less a company pays for its acquisitions, according to a new study by Sauder School of Business finance Professor Kai Li.


Her forthcoming Journal of Corporate Finance paper shows the cost of a successful acquisition is reduced by 15.4 per cent with each female director added on a board. It also reveals that each additional female director reduces the number of a company’s attempted takeover bids by 7.6 per cent.

“Female board members play a significant role in mitigating the empire building tendency of CEOs through the acquisition of other companies,” says Professor 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 researchers say their results suggest women are less interested in pursuing risky transactions and require the promise of a higher return on investment.


"This finding adds fire and force to recent calls to mandate a minimum number of women on the boards of publicly traded companies."
– Sauder Finance Professor Kai Li

For the study, the researchers analysed 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, the researchers looked at the bid premium – the difference between the final offer price and the stock price of the targeted firm before the deal was signed. These figures were then correlated with the number of women directors on the various boards.

“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.”

Earlier this month, the Ontario Teachers’ Pension Plan, the largest single-profession pension plan in Canada, formally requested the Ontario Securities Commission to require all companies listed on the Toronto Stock Exchange to have at minimum of three women on their board of directors by 2020 or face delisting from the exchange.

The study, “Director Gender and Mergers and Acquisitions,” was accepted for publication by the Journal of Corporate Finance in November 2013, and was co-authored by Sauder Finance Professor Maurice Levi and former Sauder PhD student Feng Zhang, now an Assistant Professor at the University of Utah.