Gender diversity on boards and M&A deals

Abstract

The outnumbering of women on corporate boards has become an increasingly contentious topic in Europe and this research is contributing to the discussion by focusing on the economic consequences of board gender diversity on M&A deals. European countries implement jurisdictions for board gender quotas that has implications for firms. In the majority of cases, M&A deals are value-destroying instead of value-enhancing and one reason for this is the overconfidence of managers concerning the synergies of the acquisition. Overconfidence and risk-seeking behavior could be seen as masculine characteristics. This raises the question if the presence of women on corporate boards influences the acquisition outcomes. This research examines the effect of gender diversity on corporate boards on the bid premium and the size of the target company they acquirer. This research also takes the gender quota legislation into account. By using a sample of 641 M&A deals in Europe in the period 2003-2016 it is found that there is a negative effect between gender diversity and both the bid premium and the size of the target company. Moreover, gender diversity has an unfavorable influence on the bid premium when there is a gender quota legislation implemented in that country.

Keywords: mergers and acquisitions, gender diversity, bid premium, target size, gender quota laws.