DP15828 Trainspotting: Board Appointments in Private Firms

Author(s): Audinga Baltrunaite, Egle Karmaziene
Publication Date: February 2021
Keyword(s): Board Of Directors, director supply, Match quality
JEL(s): G32, G34
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15828

This paper examines how the size of the corporate directors' labor market affects board appointments in Italian private limited liability firms. As an exogenous shock to a firm's access to potential non-local directors, we exploit the gradual expansion of the high-speed railway network that improves intercity mobility. We find that the non-local supply of directors increases the positive assortative matching between directors and firms: high-quality firms improve the quality of their boards, while low-quality firms reduce it. We also show that director quality is positively associated with firm growth and productivity, and negatively associated with the probability of default.