Women directors appear to be more cautious shoppers than their male counterparts when it comes to company acquisitions, according to a new study by researchers at UBC’s Sauder School of Business.

The research found companies with women directors were less likely to approve mergers and acquisitions and the price they paid for acquisitions was reduced by 15.4 per cent for each female director on the board.

The result was improved shareholder value in companies with female directors, said Sauder finance professor Kai Li, who co-authored the study.

“Female board members play a significant role in mitigating the empire-building tendency of CEOs through the acquisition of other companies,” Li said.

“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.”


A UBC study found companies saw the costs of corporate acquisitions fall by 15.4 per cent for each woman on the board. (Paul Sancya/Associated Press)

The study, to be published in the Journal of Corporate Finance, was based on examination of 458 merger attempts by S&P 1500 companies done between 1997 and 2009. Most of these companies had just one woman on their boards, but she is neverthless influential.

"Merger deals, acquisitions typically start with the CEO but have to be accountable to the shareholders and that is the board. So every vote counts," she said. 

Li attributes the difference to women directors being “less overconfident” by comparison with male directors. Women are less interested in pursuing risky transactions and require the promise of a higher return on investment before allowing an acquisition to go ahead, she said.

More cautious

Female directors are likely to be less optimistic about future cash flows from an acquisition and are unlikely to agree that a merger will lead to big discounts on operating costs, Li said.

Each additional female director on a board reduces the number of a company’s attempted takeover bids by 7.6 per cent, indicating that women may act to temper hasty decisions about acquisitions by predominantly male CEOs, she added.

"In a corporate setting, CEO typically is male and the majority of the board are male, so they have this overconfidence and are more likely to make deals happen but female board members play a more disciplined role ‘Let’s stop. Let’s think about it. Let’s talk about opportunity. Let’s talk about the price,’" Li said.

Li said she opted to study M&A decisions because they invariably involve intensive deliberation at the board level and thus were likely to reflect the impact of having women on the board.

She said the study points to the need for more research into the impact of women directors on board decisions, especially when there is pressure to mandate more women on corporate boards.

The Ontario Teachers’ Pension Plan made a request to Ontario Securities Commission last month 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.

Li said many questions remain unanswered including why women are less overconfident, what other effects they might have on corporate decisions and whether other forms of diversity could affect how boards make decisions.