Crime and Business Performance in Central America

Abstract

This paper looks at the region of Central America and its purpose is to explore the effect on businesses of one factor that is particularly pervasive in the area - crime. Specifically, this paper looks at the relationship between crime against firms and business performance. The hypothesis posed is that there exists a negative association between crime experienced by firms and business performance. The paper finds that while there is no statistically significant relationship between a firm’s expenditures on crime and their performance as measured by sales growth rates, it does find evidence that firms that experienced crime invested less in capital and hired fewer new employees than did firms that did not experience crime. Additionally, the paper finds that crime incidence in a firm is associated with higher rates of corruption, more spending on private security and a lower likelihood to offer employee training.