Trainspotting: Board Appointments in Private Firms
46 Pages Posted: 7 Aug 2019 Last revised: 27 Mar 2023
Date Written: March 24, 2023
This study examines how the labor market for corporate directors impacts board appointments in Italian private firms. Using the high-speed railway expansion as an exogenous shock, we find that an increase in supply of non-local directors leads to higher degree of positive assortative matching. High-quality firms improve their board quality at the expense of low-quality firms. The latter struggle to find substitutes and experience difficulty attracting high-quality directors, which further cascades into worse firm performance. Overall, the supply of non-local directors relaxes constraints on positive assortative matching but also contributes to overall firm inequality.
Keywords: director supply, board of directors, match quality
JEL Classification: G32, G34
Suggested Citation: Suggested Citation