Firm Investment decisions in the post-conflict context

Economic and political transition can occur through peaceful or violent means. Violent transition 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 during transition, it is not as important in the post-conflict 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. This indicates that obstacles to investment are context specific.