Abstract
We examine how the size of the labor market for corporate directors impacts board appointments in Italian private firms. Using the high-speed railway expansion as an exogenous shock to costs of serving on boards, we find that an increase in the supply of non-local directors leads to a higher degree of positive assortative matching between firms and directors. High-quality firms improve their board quality at the expense of low-quality firms. The director–firm matching effects are muted among companies with owners acting as board directors. This finding highlights the importance of director entrenchment in the corporate governance of private firms.
| Original language | English |
|---|---|
| Article number | 102642 |
| Pages (from-to) | 1-20 |
| Number of pages | 20 |
| Journal | Journal of Corporate Finance |
| Volume | 88 |
| Early online date | 8 Aug 2024 |
| DOIs | |
| Publication status | Published - Oct 2024 |
Bibliographical note
Publisher Copyright:© 2024 Elsevier B.V.
Funding
We thank Morten Bennedsen (Editor), Silvia Giacomelli, Swarnodeep Homroy, Ernst Maug, Sauro Mocetti, Naciye Sekerci, Alminas Žaldokas, an annonymous Referee, and participants of the seminars at the Bank of Italy workshop on “Labour mobility and migration: determinants and consequences” in Rome, the 2nd Baltic Economic Conference in Riga, 4th Marco Fanno Alumni Workshop in Naples, 25th International Panel Data Conference in Vilnius, the Ben-Gurion University, Corporate Finance Webinar, the University of Edinburgh, the University of Groningen, the University of Mannheim, the University of Namur, Workshop for Women in Political Economy 2019 in Mannheim, the Ghent University, EFA (Aalto), IIES, the EALE, the IWH Halle Seminar and the 18th Corporate Finance Day. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. The paper was previously circulated under the name “Trainspotting: Board Appointments in Private Fims”. We are responsible for all remaining errors.
| Funders |
|---|
| Universiteit Gent |
| Educational Foundation of America |
| IWH Halle Seminar |
| University of Edinburgh |
| Rijksuniversiteit Groningen |
| Universität Mannheim |
| EALE |
| International Institute for Environmental Studies |
Keywords
- Board of directors
- Director entrenchment
- Director supply
- Match quality
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