The Transaction Advisors Institute was recently asked about the prevalence of research on the role of gender in M&A performance. 

Four papers were identified that looked at the impact of female directors on M&A activity and bid premiums, the gender gap in M&A deal leadership, and broader implications of gender diversity on M&A decision-making. 

The notes below summarize the key findings:

Paper #1: Director Gender and Mergers & Acquisitions

Journal of Corporate Finance, Volume 28, 2014, Pages 185-200, ISSN 0929-1199 Maurice Levi, Kai Li, Feng Zhang

Main Theme: This paper examines the influence of female directors on corporate acquisitiveness and bid premiums in M&A transactions, suggesting that women directors lead to more prudent deal-making.

Key Findings:

Reduced Acquisitiveness: The study finds a "negative and significant association between the fraction of female directors on a corporate board and the number of acquisition bids." Each 10% increase in female directors is associated with a 7.6% reduction in acquisition bids.

Quote: "companies with more women directors are less acquisitive than those with fewer women directors. In terms of economic significance, each ten percent of female directors on a board, corresponding to approximately one female director, is associated with a reduction in the number of acquisition bids by 7.6%."

Lower Bid Premiums: Firms with more female directors pay lower bid premiums, indicating less overestimation of merger gains. This suggests that less overconfident female directors are more cautious in their evaluations.

Less Overconfidence: The paper links these findings to the idea that women are generally less overconfident than men. The authors state, "women are generally viewed as being less overconfident/more cautious than men, behaviors that have been attributed to the greater investment made in reproduction and thereby in the survival of our species."

Shareholder Value: The authors find "support that female directors help create shareholder value."

Methodology: The study analyzes acquisition bids by S&P 1500 companies from 1997-2009, looking at close to 20,000 firm-year observations.

Important Takeaway: This study positions female directors as a check against overconfident male executives and shows a correlation between gender diversity and more value-conscious M&A decisions.

Paper #2:  When Gender Matters: the Role of Women in Mergers and Acquisitions

Risk Governance & Control: Financial Markets & Institutions | Volume 13, Issue 2, 2023 37, Benedetta Tiveron, Guido Max,Mantovani, Andrea Moro

Main Theme: This paper investigates the impact of female directors on M&A bid initiations in European companies, also addressing how this relationship is affected by national context.

Key Findings: 

Increased Acquisitiveness (Contradictory to prior research): The study finds that "the addition of a female director increases the number of bid initiations by 12.86 percent," a direct contradiction to earlier findings that female directors decrease deal activity.

National Context Matters: The paper highlights that "the magnitude and sign of female impact on firms’ acquisitive behavior vary according to the nation in which the firm is located." This indicates that cultural and legal differences influence the effect of female directors.

Quote: "the magnitude and sign of the impact that the female share on boards has on the number of bid initiations vary across countries, possibly due to sociological, economic, and legislative differences."

Country Specific Effects: Specifically, the study finds that an increase of women on boards for Italian firms will increase bid initiations by 32.58% while other countries such as Belgium and Germany will see a decrease in deal activity.

Other Drivers: The study also finds that board size, the presence of independent directors, CEO duality, and financial factors such as ROA and negative sales growth all affect the number of bid initiations.

Methodology: The authors analyze a sample of 250 European companies from 2009 to 2018 using a negative binomial regression model.

Important Takeaway: This research challenges the notion that female directors universally lead to fewer acquisitions. It suggests that boardroom dynamics are affected by national context and that female directors can shift the emphasis of the conversation to promote more deals in some cultural contexts.

Paper #3: Gender, Credentials, and M&A

BYU Law Review, Volume 48 Issue 3 Article 5 Winter 1-5-2023, Tracey E. George, Mitu Gulati, Albert Yoon

Main Theme: This research investigates the gender gap in M&A deal leadership among lawyers, exploring whether women are equally likely to be chosen as lead counsel given comparable credentials.

Key Findings:

Persistent Gender Gap: The study finds that, initially, women lawyers were "less likely than men to be chosen to lead a deal." This disparity diminishes, but does not disappear, when controlling for multiple factors like schooling, experience, and law firm environment.

Elite Law School Advantage: While attending elite law schools generally improves the odds of leading deals, the effect differs for men and women. Attending top schools was more beneficial for men than women, and in the case of Yale, "women graduates of Yale Law School were less likely rather than more likely to lead a deal, as compared with the baseline group of law schools ranked outside the top six.”

Partner Disparity: A "statistically significant difference" exists in partnership status, with "nearly a third of men (31%)" being partners compared to "17% of women" even though women make up roughly a quarter (27%) of lawyers in the study's dataset and have made up larger portions of recent graduating cohorts.

Clerkships: Though a small difference, a statistically significant gap exists where 5% of men had clerkships compared to 4% of women.

Other Credentials: Despite holding other comparable credentials, such as "Order of the Coif" status, men were still more likely to lead deals.

Strategic vs. Financial Deals: The study finds "that women were more likely to appear on strategic, compared with financial, deals." The authors speculate that this difference might be due to the underrepresentation of women in the private equity and venture capital firms who participate in financial M&A deals.

Diversity-Focused Firms: Women working at firms recognized for their diversity were more likely to lead deals. "We observe that women at a firm ranked by American Lawyer for its diversity were 5% (Column 8) more likely to lead a deal than women working at firms not on this ranking."

Methodology: The researchers analyzed 2,880 M&A deals from 2010-2020, where a public company was involved. They collected data on both deals and lawyers, broadly defining M&A lawyers and then examining a subset who led deals based on SEC 8-K filings.

Important Takeway: The study highlights that, while elite education and credentials are important, they don't fully explain the gender gap in M&A leadership. Systemic biases, firm environments, and client preferences likely contribute. Also, it indicates that there may be different kinds of opportunities for women in M&A work, with women disproportionately working on strategic vs financial deals.

Paper #4: Women and M&A

UC Irvine Law Review 359 (2022), (August 3, 2021) Last revised: 6 Feb 2024, Afra Afsharipour 

Main Theme: This paper examines the underrepresentation of women in M&A advisory roles (both legal and financial) and explores the broader benefits of diversity in M&A decision-making.

Key Findings:

Women's Underrepresentation: Women are significantly underrepresented as lead legal advisors in M&A transactions despite increasing numbers of female lawyers.

Quote: "even for women that rise to law firm partnership, 'biases combined with law firm structure and the absence of objective criteria for evaluating performance reduce women’s income and the credit they get for bringing in business.'"

Biases and Structural Barriers: The paper attributes the underrepresentation to explicit and implicit biases, structural biases in law firms, and disparities in promotion, credit, and pay.

Value of Diversity: The paper argues that increased gender diversity can improve M&A decision-making, by mitigating some of the "agency problems and behavioral biases" that can taint the decision making of M&A deals. The study notes that research suggests that female executives engage in less empire building behavior, and the paper cites one study where the announcement returns of M&A deals led by female executives were 2% higher than those led by male executives.

Need for Systemic Change: The paper proposes several methods for promoting the inclusion of women in M&A roles, including disclosure and transparency, addressing biases, stakeholder pressure, quotas, and improving pipelines in professional schools.

Interesting Quote: “A bias against a woman negotiator is probably something that most women in a deal environment could relate to …When you are the only woman at the table, it’s very common that others may interrupt, finish your sentence, or not give you subtle encouragement to continue. So, you have to ‘take command of a room’ to establish yourself as the deal lead, something that a man might be given naturally.”

Women in Financial Advisory: Similar to their underrepresentation as legal advisors, women face challenges in financial advisor roles and a lack of visibility in this field.

Methodology: This is a review article drawing on prior research and other sources to present arguments about the value of diversity and the factors preventing women's rise in M&A. The article included tables summarizing data on women's representation as lead M&A counsel, however, the methodology for this data is not specified within the text.

Important Takeaway: This paper makes the case that diversity is not just a matter of equity but also necessary for better M&A outcomes, suggesting that women are less likely to engage in "empire-building" acquisitions that destroy shareholder value.

Overarching Themes:

Gender and Risk: These papers explore the interplay between gender and risk-taking in M&A, though with differing conclusions regarding acquisition frequency, some linking female directors to more prudent risk taking, and others suggesting female directors lead to more deals. This highlights the complexity of these issues, and the need to consider country-specific cultural norms.

Systemic Barriers: Despite progress in women's education and professional roles, systemic barriers persist in M&A deal leadership. These barriers include biases in selection, promotion, and recognition, requiring active steps to create more equitable opportunities.

Value of Diversity: All the sources suggest that diversity in M&A decision-making is not just an equity issue but also a strategic imperative, potentially leading to more successful deals.

Complexity of Gender: The findings across the different sources highlight the fact that generalizations about gender may be insufficient and that country and other contextual factors affect the relationship between gender and deal-making.

Key Takeaways and Recommendations:

Increased Board Diversity: Actively promote gender diversity in corporate boards, as there is evidence that it can improve decision-making in both strategic and financial contexts.

Address Systemic Biases: Organizations involved in M&A should take a critical look at their practices to identify and mitigate unconscious biases that hinder women's advancement. This includes creating objective criteria for performance evaluation.

Promote Transparency: Improve transparency in promotion, pay, and credit allocation to ensure fairness.

Invest in Pipelines: Support women in professional schools and early in their careers to build the leadership pipelines needed for change.