Killing Growth: Homicides and Corporate Investment in Brazil

Tiago Loncan

doi:10.1080/00220388.2023.2286891

Killing Growth: Homicides and Corporate Investment in Brazil

Tiago Loncan

Accounting & Financial Management

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Abstract

We examine the effects of violent crime on corporate investment and financing decisions of Brazilian firms. Exploring city variation in homicides, we find that an increase in the growth rate of homicides is associated with significantly lower corporate investments, with lower labour investments, and with a higher likelihood of layoffs. Spikes in violent crime are also associated with more conservative financing policies, reflected in higher cash holdings, in lower R&D (research and development) expenditures, and in lower dividend payments. Homicides further affect investment efficiency and financing choices, decoupling investment from debt finance and profitability. Moreover, the negative association between homicides and investment is significantly stronger in smaller firms, which highlights the uneven costs of violent crime in reducing firm growth.

Original language	English
Pages (from-to)	533-552
Journal	JOURNAL OF DEVELOPMENT STUDIES
Volume	60
Issue number	4
Early online date	10 Dec 2023
DOIs	https://doi.org/10.1080/00220388.2023.2286891
Publication status	Published - 2024

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Killing Growth - Homicides and Corporate Investment in Brazil (author info)Accepted author manuscript, 404 KBLicence: CC BY

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abstract = "We examine the effects of violent crime on corporate investment and financing decisions of Brazilian firms. Exploring city variation in homicides, we find that an increase in the growth rate of homicides is associated with significantly lower corporate investments, with lower labour investments, and with a higher likelihood of layoffs. Spikes in violent crime are also associated with more conservative financing policies, reflected in higher cash holdings, in lower R&D (research and development) expenditures, and in lower dividend payments. Homicides further affect investment efficiency and financing choices, decoupling investment from debt finance and profitability. Moreover, the negative association between homicides and investment is significantly stronger in smaller firms, which highlights the uneven costs of violent crime in reducing firm growth.",

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Killing Growth: Homicides and Corporate Investment in Brazil

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