Reshaping Corporate Boards through Mandatory Gender Diversity Disclosures: Evidence from Canada

Abstract

We study whether and how standardized gender diversity disclosure requirements affect women representation on corporate boards. Our analysis takes advantage of Canada's 2014 regulation, which requires disclosures of consistent and comparable information on boards' gender diversity policies and guidelines. Using a difference-indifferences design, we find that the disclosure regulation increases women representation on boards. The increase is more pronounced among firms with stronger shareholder oversight, as proxied by ownership from ESG-friendly investors, poor diversity performance pre-regulation, TSX index membership, and U.S. cross-listing. In addition, after the regulation firms that make stronger diversity commitments (e.g., disclosing the adoption of written diversity policies and diversity targets) experience a higher increase in ownership by foreign ESG-friendly investors. Together, our findings suggest that standardized disclosure requirements enable shareholders to be better monitors, thereby improving board gender balance.