Gender diversity and acquisitions: How female directors add value in acquisition decisions

Abstract We investigate board gender diversity and acquisition performance. Greater gender diversity promotes value‐enhancing acquisitions. Utilizing an external shock to board composition, we determine whether and why an increase in female directors adds value. Female directors have unique characteristics relative to their male counterparts that contribute to their ability to add value during the merger and acquisition process. The positive market reaction following an acquisition is rationalized by better deal terms, monitoring around the acquisition and post‐merger performance. The extensive professional networks and unique backgrounds female directors possess are the underlying mechanisms contributing to acquisition decisions' success.