New regulations in the Brazilian private security industry : effects on turnover and human capital outcomes

Purpose - This paper aims to examine the effects on firms' outcomes of a new government regulation on the private security industry that aimed to enhance the selection and training processes for armed-private security officers. Design/methodology/approach - By using human capital theory and using a data set built from various public sources, this study analyzes the effects of a new regulation implemented in 2013-2014 in Brazil mandating psychological assessments for hiring private security armed officers. Firm-level data and a Difference-in-Differences (DiD) identification strategy are used to investigate the effects on turnover and human capital outcomes. Findings - The study identifies substantial changes resulting from the new government regulation in private security firms. While it has led to increased turnover rates, the regulation has also facilitated firms in enhancing the human capital composition of their workforce by enabling the recruitment of more experienced personnel. Research limitations/implications - This research informs to current debates on the effects of policy interventions on firm's outcomes by showing how regulations aimed to improve the configuration of human capital can generate win-win situations for both firms and citizens, despite the short-term trade-offs between higher turnover rates and improved human capital outcomes. Practical implications - Refining selection and training processes can enhance the workforce in private security firms by replacing less capable professionals with more experienced ones. Insights from this study offer guidance to policymakers and industry practitioners in shaping effective business and public policies. Social implications - This study underscores the role of training and psychological assessments in enhancing the composition of human capital in the private security industry. Originality/value - By highlighting the role of policy interventions in establishing barriers to unskilled workers engaging in hazardous activities, this study contributes to the burgeoning literature in strategic management on the interaction between policy interventions and firm outcomes.