Firm Investment Decisions in the Post-Conflict Context

Abstract

Civil conflict disrupts the incentive for firms to make productive investments. This paper studies the determinants of profit reinvestment for firms in post-conflict transition economies. Results indicate that while access to finance is an important determinant of reinvestment in general, access to finance is not as important in the post-civil war context. However, property rights protections, in particular institutions of contract enforcement, are a more important determinant of profit reinvestment for firms operating in the post-conflict environment than for firms in general. Context specific obstacles to investment imply unique policy responses to facilitate post-conflict recovery.