A new report on women on corporate boards by UC Riverside business professor Jerayr 'John' Haleblian, found that boards that meet more frequently and have women and minority members, generate more value when closing company purchase deals.

Haleblian noted:

When they meet more frequently, they get a better price when they cash out. But there's nuance to that. It wasn't just frequency that mattered. It was also kind of the makeup of the board.

The analysis was based on public data from 470 boards of directors of companies with a  goal of buyout between 2002 and 2014. The other authors of the study are Stevo Pavićević, assistant professor at the Frankfurt School of Finance and Management, and Thomas Keil, professor of management international at the University of Zurich.

Titled "When Do Boards of Directors Contribute to Shareholder Value in Firms Targeted For Acquisition? A Group Information-Processing Perspective," the study was published in the journal Organization Science.

Key findings

“Female directors offer a different perspective. And when you have more perspectives, you tend to get better discussion, more thorough, and a more complete discussion,” stressed Haleblian.

Pointing out how board performance can be measured by calculating the proportion of the purchase premium paid by the acquiring company over the total value of the shares in the sold company, the data about having women directors was particularly compelling.

If you own stock in a company targeted for acquisition, the behavior & makeup of the company’s board of directors – particularly whether it includes women – could be worth a lot of money for you. Read more @UCR_Business https://t.co/IqNtAG9X8I

— UC Riverside (@UCRiverside) March 8, 2023

Some of the most important results:

• When the boards of the selected companies had two or more women directors, the sale price of the company increased by more than 5% compared to boards without women.
• 31% of boards had one or more women directors. Only 14% had two or more.
• Boards with members who served on multiple other corporate boards, known as "oversized" directors, tended to capture less value.

The data did not allow for an analysis of how all-women boards can operate.

“Unfortunately, even in our sample, there's not an overwhelming amount of women on boards. We did have boards without women, and when boards did have women, it wasn't like they ever reached a majority,” highlighted Haleblian.

The study also found that the quality of board meetings makes a bigger difference in diversified acquisitions, such as when a company buys a company in a different industry. The target company's board will need to answer questions like "what is our value to them?" And, “how will they use us?”

“If you have all men on the board, it's possible that they'll think in one way. If you bring in minority members, they might offer a fresh perspective,” added Haleblian.