Having women on the board results better acquisition and investment decisions and in less aggressive risk-taking, yielding benefits for shareholders. What’s less clear is why these effects happen.
Our research suggests one potential reason: Having female board members helps temper the overconfidence of male CEOs, improving overall decision making for the company.
…One benefit of having female directors on the board is a greater diversity of viewpoints, which is purported to improve the quality of board deliberations, especially when complex issues are involved, because different perspectives can increase the amount of information available. At the same time, research has found that female directors tend to be less conformist and more likely to express their independent views than male directors because they do not belong to old-boy networks.
…Our study has two important policy implications. First, it suggests that female board representation matters more in certain industries, because some industries have more overconfident CEOs. Second, our findings suggest female board representation can be especially beneficial in helping firms weather crises. Overall, our research supports the view that having women on boards improves strategic decision making and benefits firms.