TERRORIST ATTACKS AND CORPORATE INVESTMENT IN INDONESIA
Using yearly data from 1997 to 2017, this paper studies the effect of terrorism (number of attacks) on corporate investment in Indonesia. Applying an investment-type model, we show that firms reduce their capital expenditure due to an increase in the number of terrorist attacks. On average, a one standard deviation increase in the number of terrorist attacks reduces corporate investment by 9.23%. We also find heterogenous reactions of firms to terrorism across different sectors and different panels based on firm characteristics. Finally, our main results remain consistent after performing several robustness tests.
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.