Trainspotting: Board Appointments in Private Firms

Audinga Baltrunaite and Egle Karmaziene ()
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Egle Karmaziene: VU University Amsterdam; Swedish House of Finance; Tinbergen Institute

No 1278, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We examine how the size of the corporate directors’ labor market affects the quality of board appointments in Italian private firms. To establish the causality of the relationship, we exploit exogenous variations in firms’ access to non-local potential directors following the gradual introduction of a high-speed train, which improved rail connections between cities. Using administrative data on board members belonging to the universe of limited liability companies and a two-way fixed-effects model, we obtain time-invariant measures of firm and director quality. We demonstrate that a positive shock to the non-local director supply increases positive assortative matching between firms and directors. High-quality firms improve the quality of their boards, while lower-quality firms attract lower quality directors. The effect arises from a more active re-matching along the high-speed train line. Our results further suggest that the private firms’ boards with higher quality directors are associated with higher firm growth and productivity, and a lower probability of default.

Keywords: director supply; board of directors; match quality. (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-bec and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Trainspotting: Board Appointments in Private Firms (2021)
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