Director Gender and Mergers and Acquisitions

44 Pages Posted: 9 May 2012 Last revised: 8 Nov 2013

Maurice D. Levi

University of British Columbia (UBC) - Sauder School of Business

Kai Li

University of British Columbia (UBC) - Sauder School of Business; China Academy of Financial Research (CAFR)

Feng Zhang

University of Utah - Department of Finance

Date Written: October 2013

Abstract

Does director gender influence CEO empire building? Does it affect the bid premium paid for target firms? Less overconfident female directors less overestimate merger gains. As a result, firms with female directors are less likely to make acquisitions and if they do, pay lower bid premia. Using acquisition bids by S&P 1500 companies during 1997-2009 we find that each additional female director is associated with 7.6 percent fewer bids, and each additional female director on a bidder board reduces the bid premium paid by 15.4 percent. Our findings support the notion that female directors help create shareholder value through their influence on acquisition decisions. We also discuss other possible interpretations of our findings.

Keywords: director gender, bid initiation, bid premium, mergers and acquisitions, overconfidence, risk aversion

JEL Classification: G34, G38

Suggested Citation

Levi, Maurice D. and Li, Kai and Zhang, Feng, Director Gender and Mergers and Acquisitions (October 2013). Available at SSRN: https://ssrn.com/abstract=2054709 or http://dx.doi.org/10.2139/ssrn.2054709

Maurice David Levi

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Henry Angus 865
Vancouver BC V6T 1Z2
Canada
604-822-8260 (Phone)
604-822-8521 (Fax)

Kai Li (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~kaili

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Feng Zhang

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112-9303
United States

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