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A businesswoman stands at the head of empty conference room table, her back to the viewer. She is looking out the windows at the city skyline as the sun sets, illuminating her silhouette in a golden glow.

When it comes to corporate decision-making in America, women are woefully underrepresented: Despite making up 58% of the nation’s workforce, they hold just 28% of C-suite positions and 29% of corporate board seats.  

According to Kristi Minnick, Bentley’s Stanton Professor of Finance, a lack of gender diversity among senior executives can adversely affect a company’s bottom line. In research appearing in the current issue of Journal of Business Finance and Accounting, Minnick and her co-authors demonstrate that having women in the boardroom during merger and acquisition (M&A) decisions significantly enhances a firm's value.  

“Female directors have unique characteristics relative to their male counterparts that contribute to their ability to add value during the merger and acquisition process,” Minnick explains, further noting that “the extensive professional networks and unique backgrounds they possess are the underlying mechanisms” that contribute to their success. 

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For their study, the researchers examined more than 10,000 U.S. firms with publicly announced M&A activity during 1999 and 2000, restricting their data set to deals valued at $1 million or greater in which the bidder sought to acquire more than 50% of the outstanding equity. They then compared the financial results of the M&A decision — defined as either “value-creating” or “value-destroying” — with the gender composition of each company’s board. “We found that gender-diverse acquirers generated higher mean dollar returns of $16.77 million, compared with $3.88 million reported by their male-only counterparts,” Minnick reports. Further quantifying based on the total number of women sitting on each company’s board, the researchers determined that every one-unit increase in the fraction of female directors increases a firm’s probability of making a value-creating acquisition by 18%.  

Headshot of Finance Professor Kristi Minnick
Professor Kristi Minnick

After establishing a clear link between board gender diversity and increased financial performance, the team set out to identify qualitative attributes that explain how women board members give companies a competitive advantage. “Current academic literature suggests that women are more effective and collaborative communicators and more diligent about applying ethical standards,” Minnick explains. “They are also less likely than men to display managerial overconfidence, which is associated with rash decision-making and opportunistic empire-building.”  

As these characteristics are broadly defined and inherently subjective, she and her co-researchers sought empirical evidence of gender-based performance differences. They analyzed publicly available data relating to directors’ educational and professional backgrounds, ultimately pinpointing distinct traits among women directors that boost acquisition outcomes. “Compared to the men in our sample,” Minnick shares, “female board members had more robust professional networks and Ivy League educations, held multiple degrees and had prior M&A experience.” Notably, these associations were absent among male directors. 

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The research team also assessed the monitoring role of female directors in the acquisition process. Using board meeting frequency and attendance as proxies, they found that gender-diverse boards meet more often and have higher attendance rates, which suggests greater monitoring intensity and lengthier due diligence — an interpretation, Minnick says, subsequently confirmed by post-acquisition data demonstrating ”significant improvements in financial performance, return performance and market valuation in the long run.”  

Beyond explaining how and why women add value in the boardroom, the study‘s findings have broader social implications. “Our research shows that female directors are successful due to their experience, education, financial expertise and network skills,” Minnick explains. “This underscores the critical need for companies to create and sustain a robust pipeline of female talent and ensure that women are given opportunities to advance into leadership positions where they can further develop those skills and qualifications.”

That’s easier said than done, however. Previous studies have shown that women in the workforce often endure a “motherhood penalty” — that is, lower pay and fewer promotions due to a prevalent perception that women become less competent and committed to their jobs after starting families — that inhibits their advancement to senior leadership positions. “Until we introduce more structural supports, such as paid parental leave and affordable childcare, women will continue to face employment barriers,” Minnick says. “To achieve gender equity in the workplace, we also need gender equity outside the office.” 

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