Another Reason to Hire Female CEOs: Less Testosterone

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REUTERS/Ray Stubblebine

designed by Nick Graham and marketed exclusively by the retailer. After the ceremonies, the men stayed outside the entrance to the Bryant Park Tents opening car doors, tipping hats and just saying hello to the fashion show attendees. REUTERS/JCPenny/Ray Stubblebine/Handout RFS/AT

Young male CEOs’ hormones sometimes get the better of their economic reasoning. Especially around the issues of merging and acquiring. So more companies should have women CEOs. At least that’s the way we’re reading a new study from the Sauder School of Business at the University of British Columbia.The study, which is in the current issue of the journal Management Science, looks at the outcomes of 350 mergers and acquisitions dating back to the 1997. It found that younger, and by implication, more testosterone-laden male CEOS behaved differently, and sometimes less in accord with sound business principles, than their older brethren.

I know what you’re thinking: If the researchers really wanted to  control for testosterone, why didn’t they compare the behavior of male CEOs to female CEOs? Oh, that’s right.

The way young male CEOs handle mergers and acquisitions may remind some people of the way young males tend to date. They are more aggressive — 4% more likely to initiate an attempt to acquire another company. But they’re also way more wary of commitment — 20% more likely to give up on the whole deal if things aren’t going the way they like. And finally they’re 2% more likely to be caught in a tender offer, which sounds more enticing than it really is. It means that when the CEO spurns a bid, the suitor tries to go around them straight to the board. Kind of like getting a guy’s parents and friends to get him to call you back. Except it might work.

The study follows a much remarked upon Cambridge University study that found that testosterone affected the behavior exhibited by stock traders — and increased their profits. Other research, however, has shown that the hormone also makes people more reasonable.

“Testosterone is a very powerful hormone and it affects behavior in a wide variety of circumstances,” said the study’s author Maurice Levi, who has previously researched the effect female boardmembers had on mergers and acquisitions. His conclusions on that front were kind of a draw: if a woman was on the board of an acquiring company, the price that company paid was usually lower. On the other hand, if a woman on the board of a company that was being bought, that also lowered the price. And more women lowered the price more.

Here’s hoping we get a little more estrogen in the boardrooms soon, just so that we can figure that little mystery out.