Board Gender Diversity and Corporate Response to Cyber Risk: Evidence from Cybersecurity Related Disclosure

Cyber risk has become one of the greatest threats to firms in recent years. Accordingly, boards of directors must be continually vigilant about this danger. They have a duty to ensure that the companies adopt appropriate cybersecurity measures to manage the risk of cyber fraud. Boards should also ensure that the firm disclose material cyber risk and breaches. We examine how the board's gender composition can influence the extent of such disclosure, based on a sample of the companies listed on the S&P/TSX 60 Index over the period 2014-2018. Results show evidence of a positive association between the presence and level of cybersecurity disclosure and board gender diversity. However, the board must boast a critical mass of at least three women before this positive impact can be observed. Our findings contribute to the debate on the importance of gender diversity by adding the concept of the positive influence of heterogeneity on cyber disclosure. We also augment the literature on the critical mass of women in boardrooms by providing empirical evidence that three or more women constitute the threshold for better governance. Our study has important implications for investors, stakeholders and regulators. If investors wish to increase cybersecurity disclosure, they should ask for more diversified boards. Our findings support regulators in their efforts to increase women's representation on boards by providing empirical evidence of better outcomes with this type of board composition.