Occupational risks, accidents on sites and economic performance of construction firms

Abstract

This paper examines the relationships among site risk, accident rate and firm economic performance in construction industry. We first assess safety levels on site using a specific tool we have developed, CONSRAT. We have examined during 6 years (2004-2009) 502 construction sites of 272 Spanish companies in Mallorca. We built a panel data with these safety assessments, the firm financial performance and the accident rates. Our general hypotheses are that risk on site has an effect on accident rates and the accident rates affects firm economic performance. On one hand, we obtain a significant positive linear relationship between site risk and accident rate. On the other hand, we find a significant quadratic relationship (inverted U shape) between accident rate and economic firm performance. Our empirical evidences suggest a complex relationship between those variables. Specifically, for a low range of accidents we can observe that company profitability increases while accident rate grows up, arriving to a tipping point from which more additional accidents will reduce the company profitability. These results suggest that we need policies to control accident rates, since the total cost of accidents by itself might not be enough to influence firms to invest in safety prevention.