Thursday , May 6 2021
Home / Economics / Trainspotting: Board visits in personal companies

Trainspotting: Board visits in personal companies

Trainspotting: Board appointments in personal firms

Audinga Baltrunaite, Egle Karmaziene

There is little proof of how the supply side of possible prospects affects board consultations in personal firms. This column makes use of the gradual intro of high-speed and high-comfort train services in Italy to take a look at whether access to a larger swimming pool of skill improves the match in between a company and its directors. Simpler access to non-local directors increases favorable assortative matching between directors and companies– high-quality firms improve their boards’ quality, while low-quality firms reduce the quality. Additionally, director quality is favorably connected with firm development and performance, and negatively associated with the probability of default.

Members of corporate boards are crucial to a company’s decision-making and success (Adams and Ferreira 2007, De Haas et al. 2017). Naturally, board consultations are identified by a company’s need for directors but they might likewise be affected by supply-side factors (e.g. Cai et al. 2017, Ferreira et al. 2020). As argued by Knyazeva et al. (2013: 1562), “the capability of most companies to recruit qualified independent directors is significantly impacted by the regional supply of potential directors”. Our recent research study reinforces that deem we highlights the causal link between size of the business directors’ labour market and the quality of the matching between personal firms and their directors (Baltrunaite and Karmaziene 2020). In contrast to past literature on director appointments, which has actually primarily concentrated on public business (Ewens and Malenko 2020), we study consultations in personal firms.

We study how the size of the swimming pool of prospective candidates impacts the director-firm match quality in personal firms. More specifically, to conquer the endogenous board selection– for example, worse firms may fail to recognise the significance of proficient directors– we make use of a gradual introduction of the high-speed and high-comfort train service in Italy, which connected 14 cities in between 2005-2017. Our method’s underlying logic is that the reduction in individual travel expenses (e.g. time or pain) broadens the supply of potential directors ready to accept a remote board appointment. Travel range may be important as firms may prefer in-person to online board conferences. Online gatherings required by the COVID-19 pandemic are perceived as less efficient given that just “in a space loaded with people you can take the pulse of the crowd” and “allow for an appropriate barbecuing of managers” (Economist 2020).1 Second, board conferences may be relatively regular, increasing directors’ choice for excursion. Third, these meetings might be intense and prolonged, generally lasting for a minimum of three to four hours (Hadzima 2005), leading the directors to consider comfort expenses.


We use a rich and unique dataset on Italian restricted liability companies, which integrates administrative data on board members’ identities and demographics with firm-level details on firm age, location, market, and balance sheet signs. It consists of over 295,000 firm-year observations, info on over 31,000 companies, and over 162,000 individuals who have held positions on their boards.

We reveal that a bigger swimming pool of possible non-local directors improves firm– director match quality. For example, around 157,000 directors serve on boards in Milan compared to 31,000 in Bologna. These numbers are arguably an excellent proxy for the general variety of individuals thought about by companies for their board appointments. We show that after 2 cities (e.g. Milan and Bologna) become connected by means of a high-speed train line, the boards of top quality companies situated near the high-speed train station in a city like Bologna improve by 1.3 portion points. On the other hand, non-local director supply decreases the board quality in low-quality companies– they lose directors and experience troubles substituting them. In general, the size of the possible directors’ swimming pool improves the director-firm fit by increasing the level of positive assortative matching, whereby greater (lower) talent directors rest on boards of greater (lower) quality companies. This finding follows Dauth et al. (2019) who find much better assortative matching of high-quality plant employees in big German cities.

Consistent with the enhanced mobility across places, we find that companies with access to a non-local director swimming pool employ more directors that were born or operated in the train-destinations at the cost of directors based in other places. We likewise study whether a firm’s access to non-local prospective directors modifications observable directors’ characteristics, such as their market composition or family ties. Both young people and women are disproportionally couple of among directors in Italian companies (Baltrunaite et al. 2019). We show that access to a bigger pool of prospects increases age diversity but not gender diversity on corporate boards. Our outcomes are consistent with heterogeneous movement preferences across group groups, with females (young individuals) having a lower (greater) tendency to move for long-distance work visits (Farre et al. 2020). An increased supply of non-local directors further lowers the share of family members on boards, confirming that the existence of family members in the board room is indicative of a companies’ limited tendency to draw from a broader pool of skill (Burkart et al. 2007, Perez-Gonzalez 2006, Bennedsen et al. 2007).

To shed light on the results of board quality on company results, we show that a shock in possible directors’ supply advantages premium firms, by raising profits and total element productivity, and reducing the probability of default. Constant with the idea that the limited supply of appropriate directors hinders firm development and performance, higher-quality directors render firm input utilisation more effective. Overall, the boost in high-quality companies’ performance comes at the expense of low-quality firms, possibly raising the dispersion in firm performance.


Our work provides crucial policy ramifications for high-speed train infrastructure financial investments, which connect otherwise fragmented regional labour markets for high-skill employees, such as corporate directors. Following our findings, policymakers might aim to enhance worker mobility as such connections benefit resource allocation in the economy. We also reveal that the age variety on firms’ boards boosts, and the level of family-based appointments reduces in bigger labour markets. Yet, due to ladies’s lower tendency to move, enhancing workers’ movement is not likely to fix the absence of gender variety on boards (Farre et al. 2020). Increasing versatility in board participation or investing in human capital to raise the quality of the regional skill pool may be much better options to stabilize gender structure on boards of directors.

Authors’ note: The views revealed here are those of the authors and do not necessarily show those of the institutions they belong to.


Adams, R B and D Ferreira (2007 ), “A theory of friendly boards”, Journal of Financing 62( 1 ): 217-250.

Baltrunaite, A, E Brodi, and S Mocetti (2019 ), “Assetti proprietari e di governance delle imprese italiane: nuove evidenze e effetti sulla efficiency delle imprese”, Bank of Italy Occasional Papers No. 514.

Baltrunaite, A and E Karmaziene (2020) “Trainspotting: board visits in private firms”, Bank of Italy Temi di Discussione (Working Paper) No. 1278.

Bennedsen, M, K M Nielsen, F Pérez-González, and D Wolfenzon (2007 ), “Inside the family firm: The function of families in succession choices and performance”, The Quarterly Journal of Economics 122( 2 ):647 -691.

Burkart, M, F Panunzi, and A Shleifer (2007 ), “Household firms”, Journal of Finance 58: 2167-2202.

Cai, J, T Nguyen, and R A Walkling (2017) “Director visits – It is who you know”, Working paper 28th Yearly Conference on Financial Economics and Accounting.

Dauth, W, S Findeisen, E Moretti, and J Suedekum (2018 ), “Matching in Cities”, CEPR Discussion Paper No. 13347.

De Haas, R, D Ferreira, and T Kirchmaier (2017 ), “The Inner Functions of the Board: Evidence from Emerging Markets”, CEPR Discussion Paper No. 12317

Financial Expert (2020 ), “Low resolution: Online annual conferences may favour supervisors over investors”, 30 April.

Ewens, M, and N Malenko (2020 ), “Board dynamics over the start-up life cycle”,, 8 August.

Farre, L, J Jofre-Monseny, and J Torrecillas (2020 ), “Commuting Time and the Gender Gap in Labor Market Participation”, IZA Conversation Paper No. 13213

Ferreira, D, E Ginglinger, M A Laguna, and Y Skalli (2020) “Board quotas and director-firm matching”, ECGI – Financing Working Paper No. 520/2017.

Hadzima, J (2005 ), “Don’t Bore the Board of Directors (How To Utilize A Board Effectively)”.

Knyazeva, A, D Knyazeva, and R Masulis (2013 ), “The supply of corporate directors and board self-reliance”, Review of Financial Studies 26: 1561-1605.

Perez-Gonzalez, F (2006 ), “Acquired control and company efficiency”, American Economic Review 96: 1559-1588.


1 Nonetheless, as time passes people might adapt to the online mode of work interactions, potentially lowering the importance of personal travelling expenses.

Check Also

AMD CEO Lisa Su: ‘This is an extremely unique time in the semiconductor

National Evaluation Invite to the Capital Note, a newsletter about organization, finance, and economics. On …