DOES CRIME AFFECT FIRM PERFORMANCE: EVIDENCE FROM POST-TRANSITION ECONOMIES

Abstract

The paper addresses the relatively unexplored issue of the effects of crime against business on firm performance in post-transition economies. The focus is on the eight countries: Bosnia and Herzegovina, Bulgaria, Croatia, Czechia, Montenegro, Serbia, Slovakia, and Slovenia. Based on the comparable microdata from World Bank Enterprise Survey the analysis shows that respondents in firms who suffered crime losses are in general more likely to expect a decrease in their sales in the next fiscal period. It has been also established that in some countries those who experienced crime losses are more optimistic about the possibility to increase the sales in the short-run (Slovakia, Montenegro, and Croatia), thus indicating certain resilience to adverse effects of crime. The estimates of the multinomial model suggest that crime exposure negatively affects business activity. However, the effect was only significant for those who expect decreases in their activity – respondents who experienced losses attributed to crime are 5.9% more likely to expect a decrease in their future sales (in comparison to maintain the same level of sales).