Board gender diversity at target firms and acquisition decisions of gender diverse bidders

Abstract

We examine whether gender diversity at the target firm influences acquisition decisions by gender-diverse firms. Our findings show that gender-diverse acquirers are more likely to select gender-diverse targets over male-only firms. This preference is driven by specific attributes of female directors at the target firm, such as their educational and professional qualifications, networking abilities, functional experience, and industry expertise. Gender-diverse acquirers pay a lower premium to gender-diverse targets compared to male-only targets, and these acquisitions are positively received by the market, reflected in significant announcement-period abnormal returns. Additionally, gender-diverse firms that acquire gender-diverse targets show stronger post-acquisition performance compared to those acquiring male-only targets. These findings remain robust after addressing potential endogeneity concerns, including omitted variable bias and reverse causality.