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Boards With Women Members Do Better, Studies Find

"Ignoring half the population in places of corporate governance forces companies to play with only half of the deck and miss out on high-potential board members," Forbes contributor Kate Taylor wrote last year. "Women at the top allow greater representation and draw for women in the workforce and better outcomes for their companies."

The Sauder study is also not the only one supporting the theory that companies with more women on their boards and in other high positions are more successful than less gender-diverse counterparts.

A study by Catalyst released in 2007 found that Fortune 500 companies with the highest percentage of female board members outperformed significantly companies with low ratios of women: by at least 53% on equity, 42% on return of sales and 66% on return on invested capital. When updating its research in 2011, Catalyst found a 26% difference in return on invested capital between companies that had 19% or more women on their boards compared with those that had none.

The consulting firm McKinsey & Co.'s Organizational Health Index also indicated that companies with three or more women in top positions scored higher than other companies and in turn generally exhibited superior financial performances compared with those lacking strong female representation in high positions, including on the board of directors.

Some critics have called the findings overstated.

"The economic case for gender quotas is ... shakier than its advocates seem to realize," wrote Christina Hoff Sommers on the McKinsey and Catalyst studies for The Atlantic back in May. "Neither study has established causation: More female directors could be a consequence, rather than a cause, of business success."

In considering such criticism, Li noted, "This is always the challenge in our empirical analysis, whether we identify a causal relation  that is, the presence of female directors leads to better deal outcome or simply association."

But Li says most biological and sociological evidence supports that women are less overconfident than men, which can be an asset that plays a direct role in a company avoiding a potentially problematic merger or business deal.

"Women view the future cash flows associated with a takeover target to be lower than men see it," Li said. "Women also expect the future is more uncertain, so they call for higher discount rates for those future lower cash flows. Both effects together make women directors view takeover target firms to be less attractive, prompting women directors to recommend making fewer deals and, conditional on making a deal, paying a lower premium."

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