On the likelihood and type of merger and acquisition in the US listed companies: the role of females on the board

• DOI: https://doi.org/10.1108/IJAIM-10-2021-0205
• Published date: 04 April 2022
• Date: 04 April 2022
• Pages: 391-407
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Yousry Ahmed,Yu Song,Mohamed Elsayed

On the likelihood and type of

merger and acquisition in the US

listed companies: the role of

females on the board

Yousry Ahmed

Accounting and Finance Department, Newcastle University, Newcastle upon Tyne,

UK and Faculty of Commerce, Zagazig University, Zagazig, Egypt

Yu Song

Taiyuan University of Technology, Taiyuan, China, and

Mohamed Elsayed

Queen’s Management School, Queen’s University Belfast, Belfast, UK and

Accounting Department, Mansoura University, Mansoura, Egypt

Abstract

Purpose –This paper aims to examine whetherand how females on the board of directors affect US-listed

companies’mergerand acquisition (M&A) decisions. Specif‌ically,the paper concerns the impact of females in

the boardroom on the likelihood and type of M&A deals (i.e. foreign vs domesticacquisitions and listed vs

unlistedacquisitions).

Design/methodology/approach –Archival data of M&A deals using a sample of 17,899 f‌irm-year

observations of the US public companies from 2012 to 2018 are collected and examined using probit and logit models.

Findings –This paper offers three main resultssupporting the propositions of the behavioral consistency

theory. First,female directors are negatively associated withthe likelihood of making the acquisition. Second,

female directors are positivelyassociated with acquiring domestic rather thanforeign targets. Third, female

directorsare positively associated with acquiringlisted rather than unlisted targets.

Research limitations/implications –The f‌indings provideadditional evidence-based insights into the

debate aboutdiversity on boards with the aim of informing policyand offering practical recommendationsfor

the effectiveimplementation of gender diversity on the boards of companies.

Originality/value –Overall, consistent with the premise of behavioral theory, the results expand the

literature on gender diversity by augmenting the argument that females’behavior in corporate policies is

viewed as oppositionto change and a tendency toward risk aversion and thus,inf‌luences companies’strategic

investmentdecisions, such as M&A.

Keywords Gender diversity, Female directors, Foreign acquisitions, Domestic acquisitions,

Listed acquisitions, Unlisted acquisitions

Paper type Research paper

*The authors would like to thank Andrey Golubov, Tamer Elshandidy, Kirak Kim, Piotr Korczak,

Jon Tucker and participants at Newcastle University Business School and Queen’s University Belfast

Management School seminars for their insightful comments and constructive suggestions.

Compliance with ethical standards conf‌lict of interest: The authors declared that they have no

conf‌licts of interest. This research did not receive any specif‌ic grant from funding agencies in the

listed, commercial or not-for-prof‌it sectors.

Role of females

on the board

391

Received7 October 2021

Revised15 February 2022

Accepted8 March 2022

InternationalJournal of

Accounting& Information

Management

Vol.30 No. 3, 2022

pp. 391-407

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-10-2021-0205

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

1. Introduction

Regulatory recommendations,in recent years, have resulted in a growing number of females

taking part in economic activitiesand playing pivotal roles in modern companiesworldwide

(FRC, 2021;Khatib et al.,2021a;Nguyen et al., 2020). For example, since 2003, in Norway, the

law mandates at least 40% of directors on the board to be women (Ahern and Dittmar,

2012). In 2019, females held 20% of board seats worldwide; women took 21.3% (26%) of

board seats in Fortune 1000 (S&P 500) companies in 2018 (Catalyst, 2020). In the f‌irst

quarter of 2021, women hold 24.4% of corporate board seats on the Russell 3000 Index

(5050wob, 2021). Expectedly, by 2029, women may comprise 30%–50% of corporate

boards (MSCI, 2020).

Previous research (Adamsand Ferreira, 2009) indicates that, compared to males, females’

unique behavioral traits are associated with good governance practices (e.g. better board

attendance record and more active to join monitoring committees). Additionally, prior

studies (Brahma et al.,2020;Perryman et al.,2016;Huang and Kisgen,2013 Boulouta,2013)

suggest a positive (negative) association between gender diversity and f‌irm performance

(risk), implying that gender diversity in the boardroom is an important mechanism to

monitor and control managers. Conversely,another branch of research (Ahern and Dittmar,

2012;Sila et al.,2016)f‌inds conf‌licting, negative or no evidence of that association.

Therefore, understandingthe impact of gender diversity in strategic investment decisions –

such as merger and acquisition (M&A) deals that entail a high level of complexity and

uncertainty about their outcomes(Nadolska and Barkema, 2014)–is important to ref‌ine the

ongoing regulatory debates and mixedevidence provided by previous studies. Specif‌ically,

this paper investigates the effect of gender diversityin the boardroom on the likelihood and

type of M&A deals.

M&A is a combination of two or more companies into one new corporation or company

(Roberts et al., 2010)[1]. M&A has a vital effect on both the economy and the f‌irm. On the

economy level, M&As signif‌icantly affect economic welfare through their inf‌luence on

capital, product, labor and global markets (Bruner and Perella, 2004;Bjorvatn, 2004;

Cartwright and Cooper, 2014;UNCTAD, 2000). On the f‌irm level, companies become

involved in M&A transactions to expand beyond the extent of their organic growth and to

survive in a competitive, global world (Chadam, 2019), although some studies suggest that

acquisition is likely to destroy the value of acquiring f‌irms (Chen et al., 2016). Thus, M&A

deals are among the most signif‌icant corporatedecisions and statistics show signif‌icant and

rapid growth in M&A deals in recent years(Murugaboopathy and Dogra, 2021;Ahmed and

Elshandidy, 2021)[

2].

This motivates a wide range of research on M&A, mainly concerning acquisition size,

premium and outcome (Li et al., 2018;Ahmed and Elshandidy, 2016;Ferris et al.,2013;

Morellec and Zhdanov, 2008;Khatami et al.,2015). Furthermore, in terms of examining

gender diversity effectson M&A decisions and outcomes, Levi et al. (2014) examine whether

the gender of chief executive off‌icers(CEOs) or corporate directors plays a role in the pricing

of and returns on a sample of M&A deals in Europe and f‌ind that f‌irms with female CEOs

are associated with lower bid premium and better abnormal returns.Hummel (2018) f‌inds a

negative relationship between gender diversity and the bid premium and the size of the

target company.

That said, to the best of our knowledge, limited, if any, research has investigated the

relationship between females on the board and M&A-related corporate decisions. In

particular, this paper aims to contribute to the literature on gender diversity and M&A by

examining how females on the board inf‌luence f‌irms’likelihood of making future M&A

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