Fe­male mem­bers on cor­po­rate boards can lower num­ber of merg­ers and ac­qui­si­tions, study sug­gests

Financial Mirror (Cyprus) - - FRONT PAGE -

Does fe­male mem­ber­ship on cor­po­rate boards im­pact merg­ers and ac­qui­si­tions? As the per­cent­age of fe­males on boards of Amer­ica’s largest com­pa­nies has risen from 15% in 2005 to 20% in 2015, the ques­tion is rel­e­vant to to­day’s de­ci­sion mak­ers.

Univer­sity of Notre Dame re­searcher Craig Cross­land, man­age­ment pro­fes­sor at the Men­doza Col­lege of Busi­ness, and col­leagues de­cided to look into the num­bers. Af­ter study­ing al­most 3,000 ac­qui­si­tions be­tween 1998 and 2010, they found that the larger the pro­por­tion of women on a board of a U.S. pub­lic com­pany, the fewer ac­qui­si­tions it en­gages in.

“We found that this ef­fect ex­isted even if we looked at firms with a sin­gle fe­male di­rec­tor on the board,” Cross­land said. “A change in fe­male board rep­re­sen­ta­tion from low to high lev­els was as­so­ci­ated with an 18% de­crease in ac­quis­i­tive­ness, a 12% de­crease in ac­qui­si­tion size and a re­duc­tion of $97.2 mln in merger and ac­qui­si­tion spend­ing in a given year.”

Cross­land and his col­leagues sur­mise that in­creas­ing the pro­por­tion of fe­male di­rec­tors changes the dy­nam­ics of in­tra-board in­ter­ac­tions.

“Groups com­prised of dis­tinct cat­e­gories of peo­ple op­er­ate dif­fer­ently than groups where ev­ery­one shares sim­i­lar char­ac­ter­is­tics,” Cross­land said. “Di­verse groups tend to en­gage in dis­cus­sions that are more thor­ough, more con­tentious and more likely to iden­tify prob­lems with the topic at hand.

“Merg­ers and ac­qui­si­tions can be ben­e­fi­cial for firms, but at least as of­ten, they can de­stroy value. We think the boards with higher fe­male rep­re­sen­ta­tion are more likely to iden­tify th­ese chal­lenges in a given deal, in­creas­ing the like­li­hood that it will be de­layed or shelved en­tirely.”

Cross­land em­pha­sised that the re­searchers are not mak­ing any claims that fe­male di­rec­tors dif­fer from male di­rec­tors in terms of dis­po­si­tional ten­den­cies such as risk-tak­ing propen­sity or open­ness to ex­pe­ri­ence.

“The re­search on this is pretty sparse and we think it’s safer to as­sume that the na­ture of board-level in­ter­ac­tions is dif­fer­ent,” he said.

The study was co-au­thored by Guoli Chen of INSEAD Busi­ness School and Sterling Huang of Sin­ga­pore Man­age­ment Univer­sity, and ap­pears in the Strate­gic Man­age­ment Jour­nal.

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