CALMING INFLUENCE

Companies with more women on the board are less likely to make acquisitions

Groups of men, left alone without the civilizing influence of women, will descend into barbarism, thumping chests, picking fights, and brawling unchecked. That’s the gross stereotype, anyway.

When it comes to the behavior of corporate boards, at least, there may be some truth to it.

Boards with women are less likely to try to buy other companies, and when they do, the deals are smaller, according to a study published earlier this year in the Strategic Management Journal.

That’s true of boards with as few as one woman, but the addition of more female directors further lessens a company’s aggressive tendencies, according to co-author Craig Crossland, a business professor at the University of Notre Dame.

Crossland and his colleagues looked at 2,998 deals from 1,592 US companies between 1998 and 2010. On boards where the number of women increased from low to high (or one standard deviation below the mean to one standard deviation above), there was an 18% decrease in acquisitiveness, a 12% decrease in deal size, and an average reduction of $97.2 million in annual M&A spending.

The authors hypothesize that the presence of women on boards increases the diversity of viewpoints and results in more complete discussions about the merits of deals.

“Boards with one or more female directors will interact differently from comparable all-male boards,” they write. On boards with women “decision-making processes are likely to be more contentious, thorough, and comprehensive, and less likely to be characterized by acquiescence, rapid consensus, or groupthink.”

The study is yet more evidence that when it comes to business, women make it better. Other studies show that, on average, women are more risk averse and make safer investments then men, yet their performance as investors is about the same.

When it comes to M&A, Crossland and his colleagues don’t argue that it’s women, per se, that make boards less aggressive, but rather the diversity they contribute that has an effect. In an email, Crossland speculated that adding members of other groups not traditionally represented on corporate boards, whether in the minority on race, sexual orientation, or age, might have the same effect.

And while the authors didn’t find that that women on boards helped or hindered the company’s overall performance, “there’s a reasonable amount of work suggesting that acquisitions in general are more likely to destroy than create value for firms, so we feel pretty confident in saying that greater female representation certainly isn’t a bad thing,” Crossland said.

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