The paper examines 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. The analysis combines administrative data on board members and productivity measures of the universe of limited liability companies.
The introduction of the high-speed train service results in a positive shock to the non-local director supply, through their increased mobility. In turn, high-efficiency firms improve the quality of their boards, while less efficient firms attract lower-quality directors. Furthermore, boards with better quality directors are associated with higher firm growth and productivity.
