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

Date:
May 19, 2016
Source:
University of Notre Dame
Summary:
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 percent in 2005 to 20 percent in 2015, the question is relevant to today's decision makers.
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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 percent in 2005 to 20 percent 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 percent decrease in acquisitiveness, a 12 percent decrease in acquisition size and a reduction of $97.2 million 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 comprising 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 emphasized 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, which was co-authored by Guoli Chen of INSEAD Business School and Sterling Huang of Singapore Management University, appears in the Strategic Management Journal.


Story Source:

Materials provided by University of Notre Dame. Original written by William G. Gilroy. Note: Content may be edited for style and length.


Journal Reference:

  1. Guoli Chen, Craig Crossland, Sterling Huang. Female board representation and corporate acquisition intensity. Strategic Management Journal, 2016; 37 (2): 303 DOI: 10.1002/smj.2323

Cite This Page:

University of Notre Dame. "Female members on corporate boards can lower number of mergers and acquisitions." ScienceDaily. ScienceDaily, 19 May 2016. <www.sciencedaily.com/releases/2016/05/160519121108.htm>.
University of Notre Dame. (2016, May 19). Female members on corporate boards can lower number of mergers and acquisitions. ScienceDaily. Retrieved May 23, 2017 from www.sciencedaily.com/releases/2016/05/160519121108.htm
University of Notre Dame. "Female members on corporate boards can lower number of mergers and acquisitions." ScienceDaily. www.sciencedaily.com/releases/2016/05/160519121108.htm (accessed May 23, 2017).

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