Trainspotting: Board Appointments in Private Firms

We examine how expanding the local pool of potential directors affects board appointments in Italian private firms. To establish the causality of the relationship, we rely on the gradual introduction of a high-speed train to obtain exogenous variation in firm access to potential directors’ supply. Using administrative data on board members of the universe of limited liability companies, we find that a positive shock in director supply triggers more board renewals. Under the assumption that director and firm quality are complements in the production process, there is evidence that the director-firm match quality improves. Moreover, firms exposed to such director supply shock become more productive and the effect primarily arises from the most productive firms. Interestingly, family firms remain rather immune to a more open talent pool – their board appointments change little, and so does their productivity.