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Companies with no women on their boards may be overpaying for acquisitions.

A study by researchers at the University of British Columbia's Sauder School of Business shows that the cost of deals done by firms with at least one woman at the boardroom table is reduced by 15.4 per cent. Having additional women on the board reduced the costs even further, the study found.

The results didn't surprise researchers. "I think we'd have been more surprised if we didn't find the connection," said Maurice Levi, a professor of finance at Sauder. He co-authored the paper with another finance professor Kai Li, and Feng Zhang, assistant professor at the University of Utah.

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Prof. Levi said that he was interested in researching this question because of previous work on how the testosterone hormone influences men and women's ability to negotiate. The combative nature that the hormone brings out in young male CEOs, for example, makes them more likely to both be acquisitive and resist reasonable offers.

The study, which will soon be published in the Journal of Corporate Finance, also found that attempted takeover bids were reduced by more than 7 per cent when a female director was present.

And the more women, the better. Each woman on the board decreases the likelihood of overpaying for an acquisition or receiving a takeover bid.

"Female board members play a significant role in mitigating the empire-building tendency of CEOs through the acquisition of other companies," Prof. Li said in a statement.

The study looked at the acquisition proposals made by companies in the S&P 1500 index in the 12 years to 2009. The methodology involved comparing the bid premium (the amount paid over the share price in a takeover), with the number of female directors. Prof. Levi said the results would be the same in different countries.

At its core, the study is about the value of diversity, but but the researchers are not in favour of creating harsh mandates.

Prof. Levi disagrees with the strategy of the Ontario Teachers' Pension Plan, which called on the Ontario Securities Commission to force companies on the TSX to place at least three women on their boards of directors in the next seven years. He calls this move a "big mistake," adding that finding a way to get companies to act voluntarily will be more effective than forcing the issue.

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"In terms of encouraging women to the boardroom, [companies need to] accept that more board diversity would be useful because you'll get different points of view," Prof. Levi said. "You're representing a group of shareholders you have to take into account a whole range of interests on the product and organizational sides of things."

Prof. Levi said his next piece of research looks at women's tendancy to ask more questions of investment bankers and others during an M&A transaction than men. So far his findings follow that old chestnut; women are more likely to ask for directions when lost.

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