We examine whether information technology expertise on audit committees impacts the reliability and timeliness of financial reporting. We find a reduction in the likelihood of material restatements and information technology-related material weaknesses (which account for 55 percent of all reported material weaknesses), and more timely earnings announcements at firms with audit committee information technology expertise. These findings are robust to controlling for a firm's other information technology attributes as well as when using entropy balanced samples, and we mitigate endogeneity concerns with evidence that our findings hold in a sub-sample of firms that all possess overall high-quality information technology. Finally, a difference-in-differences analysis, inclusion of firm fixed effects, and a falsification test largely support our assertion that the quality of financial reporting is significantly improved by the presence of an audit committee information technology expert.

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Data breach disclosure laws are state-level disclosure mandates intended to protect individuals from the consequences of identity theft. However, we argue that the laws help reduce shareholder risk by encouraging managers to take real actions to reduce firms’ exposure to cyber risk. Consistent with this argument, we find an on-average decrease in shareholder risk, proxied by cost of equity, after the staggered passage of these laws. We also find the effect is attenuated for firms that already took real actions to manage cyber risk before the laws. Further, after these laws, firms are more likely to increase cybersecurity investments and have a cybersecurity officer. Finally, we observe positive abnormal returns on key dates related to the passage of these laws. Our collective evidence suggests that consumer protection disclosure mandates can benefit shareholders and, specifically, that regulators can use disclosure mandates to incentivize managers to reduce firms’ exposure to cyber risk.

Audit committee (AC) responsibilities have been increasing over time, prompting concerns that overloading ACs may impair their effectiveness. Using new measures to capture AC responsibilities based on AC charters, we find that greater AC responsibilities are associated with improved financial statement reliability. Contrary to overload concerns, this association is strongest when ACs have very high levels of responsibilities. Cross-sectional analyses indicate greater AC responsibilities improve financial statement reliability at complex firms, following significant governance lapses, when AC members are capable and experienced, and when ACs also meet often to carry out their oversight duties. Further analysis suggests that our AC responsibility results are driven by duties related to financial reporting while, in stark contrast, allocating responsibilities unrelated to financial reporting to the AC (e.g., risk management) detracts from monitoring effectiveness by decreasing financial statement reliability. The latter is consistent with an overload effect driven by responsibilities that distract the AC from its core financial reporting oversight mandate. Our results inform recent regulatory changes at some exchanges to expand AC oversight.

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