Intrastate conflict is often identified to increase the risk of foreign asset expropriation due to heightened incentives for short-term economic gains. In this paper, we investigate this notion both theoretically and empirically, and refine the conventional wisdom by examining conditions under which intrastate conflict incentivizes a host government to expropriate foreign assets. We argue that intrastate conflict increases the risk of expropriation when the government’s capability to finance civil conflict is significantly constrained. The empirical results indicate that intrastate conflict has a positive effect on the expropriation risk only when the government’s war financing capabilities are substantially low due to a high level of external debt burdens. The findings show that host governments take a strategic approach in revenue generation and the capability to finance war is the key to understanding the relationship between conflict and expropriation.
AbbasS. AliBelhocineNazimElGanainyAsmaaHortonMark. 2011. “Historical Dataset on Debt.” IMF Economic Review59: 717–42.
2.
AkhtaruzzamanM.BergN.HajzlerC.. 2017. “Expropriation Risk and FDI in Developing Countries: Does Return of Capital Dominate Return on Capital?” European Journal of Political Economy49: 84–107.
3.
AkporiayeAlero. 2024. “Competing Investor Response to Direct and Indirect Expropriation: Evidence From the Extractive Sector.” Review of International Political Economy31 (2): 728–754.
4.
AlbertusMichaelMenaldoVictor. 2012. “If You’re Against Them You’re With Us: the Effect of Expropriation on Autocratic Survival.” Comparative Political Studies45 (8): 973–1003.
5.
AllenMichael A.DiGiuseppeMatthew. 2013. “Tightening the Belt: Sovereign Debt and Alliance Formation.” International Studies Quarterly57 (4): 647–659.
6.
Arel-BundockVincentPeinhardtClintPondAmy. 2020. “Political Risk Insurance: A New Firm-Level Data Set.” Journal of Conflict Resolution64 (5): 987–1006.
7.
AsieduElizabethJinYiNandwaBoaz. 2009. “Does Foreign Aid Mitigate the Adverse Effect of Expropriation Risk on Foreign Direct Investment?” Journal of International Economics78 (2): 268–275.
8.
AzzimontiMarina. 2018. “The Politics of FDI Expropriation.” International Economic Review59 (2): 479–510.
9.
BakDaeheeLeeHoon. 2021. “Intrastate Armed Conflict Termination and Foreign Direct Investment.” Foreign Policy Analysis17 (2): oraa027.
10.
BakDaeheeLeeHoonBiglaiserGlen. 2025. “Autocratic Regime Survival, Regime Instability, and Foreign Asset Expropriation.” International Interactions51 (5): 733–759.
11.
BarroRobert J.1979. “On the Determination of the Public Debt.” Journal of Political Economy87 (5): 940–971.
12.
BarryColin M.2018. “Peace and Conflict at Different Stages of the FDI Lifecycle.” Review of International Political Economy25 (2): 270–292.
13.
BeersDavidNdukweObiageriKarimMcDanielsCharronAlex. 2023. BoC–BoE Sovereign Default Database: What’s New in 2023?Staff Analytical Note 2023-10. July 2023. Bank of Canada.
14.
BermanNicolasCouttenierMathieuRohnerDominicThoenigMathias. 2017. “This Mine Is Mine! How Minerals Fuel Conflicts in Africa.” The American Economic Review107 (6): 1564–1610.
15.
BermanEliFelterJoseph H.ShapiroJacob N.. 2018. Small Wars, Big Data: The Information Revolution in Modern Conflict. Princeton University Press.
16.
BesleyTimothyPerssonTorsten. 2008. “Wars and State Capacity.” Journal of the European Economic Association6 (2-3): 522–530.
17.
BiglaiserGlenLeeHoonJosephStaats. 2016. “The Effects of the IMF on Expropriation of Foreign Firms.” Review of International Organizations11 (1): 1–23.
18.
BiglaiserGlenStaatsJoseph. 2010. “Do Political Institutions Affect Foreign Direct Investment? A Survey of U.S. Corporations in Latin America.” Political Research Quarterly63 (3): 508–522.
19.
BlairGraemeChristensenDarinValerieWirtschafter. 2022. “How Does Armed Conflict Shape Investment? Evidence From the Mining Sector.” The Journal of Politics84 (1): 116–133.
20.
BlattmanChristopherMiguelEdward. 2010. “Civil War.” Journal of Economic Literature48 (1): 3–57.
21.
Bueno de MesquitaAlastair SmithSiversonRandolph M.MorrowJames. 2003. The Logic of Political Survival. MIT Press.
22.
BurgessStephen. 2018. “Military Intervention in Africa: French and US Approaches Compared.” Air & Space Power Journal9: 5–25.
23.
CapellaRosella. 2013. Cash, Guns, and Power: How States Pay for Wars. Boston University. Book Manuscript.
24.
Cappella ZielinskiRosella. 2016. How States Pay for Wars. Cornell University Press.
25.
CarterJeffNordstromTimothy. 2017. “Term Limits, Leader Preferences, and Interstate Conflict.” International Studies Quarterly61 (3): 721–735.
26.
CarterJeffPalmerGlenn. 2015. “Keeping the Schools Open While the Troops Are Away: Regime Type, Interstate War and Government Spending.” International Studies Quarterly59: 145–57.
27.
CarterDavid B.SignorinoCurtis S.. 2010. “Back to the Future: Modeling Time Dependence in Binary Data.” Political Analysis18 (3): 271–292.
28.
ChapmanTerrenceReinhardtEric. 2013. “Global Credit Markets, Political Violence, and Politically Sustainable Risk Premia.” International Interactions39 (3): 316–342.
29.
ChinnMenzie D.ItoHiro. 2006. “What Matters for Financial Development? Capital Controls, Institutions, and Interactions.” Journal of Development Economics81 (1): 163–19.
30.
ChowdhuryAbdur R.MurshedSyed Mansoob. 2016. “Conflict and Fiscal Capacity.” Defense and Peace Economics27 (5): 583–608.
31.
ColeHarold L.EnglishWilliam B.. 1991. “Expropriation and Direct Investment.” Journal of International Economics30 (3-4): 201–227.
32.
CollierPaul. 2000. Doing Well Out of War. In Economic Agendas in Civil Wars, ed. BerdalMats R.MaloneDavid. Lynne Rienner Publishers.
CollierPaulHoefflerAnke. 2004. “Greed and Grievance in Civil War.” Oxford Economic Papers56 (4): 563–596.
35.
DaviesShawnPettersonTheréseSollenbergMargaretaÖbergMagnus. 2025. “Organized Violence 1989–2024, and the Challenges of Identifying Civilian Victims.” Journal of Peace Research62 (4): 1223–1240.
36.
DiGiuseppeMatthew R.BarryColin M.FrankRichard W.. 2012. “Good for the Money International Finance, State Capacity, and Internal Armed Conflict.” Journal of Peace Research49 (3): 391–405.
37.
DoyleMichaelSambanisNicholas. 2000. “International Peacebuilding: A Theoretical and Quantitative Analysis.” American Political Science Review94 (4): 779–801.
38.
DuncanRoderick. 2006. “Price or Politics? An Investigation of the Causes of Expropriation.” The Australian Journal of Agricultural and Resource Economics50 (1): 85–101.
39.
EasterlyWilliam. 2002. “How Did Heavily Indebted Poor Countries Become Heavily Indebted? Reviewing Two Decades of Debt Relief.” World Development30 (10): 1677–1696.
40.
EsbergJanePerlmanRebecca. 2023. “Covert Confiscation: How Governments Differ in Their Strategies of Expropriation.” Comparative Political Studies56 (1): 3–35.
41.
Fatehi-SedehKamalSafizadehM. Hossein. 1989. “The Association Between Political Instability and Flow of Foreign Direct Investment.” Management International Review29: 4–13.
42.
FearonJames D.LaitinDavid D.. 2003. “Ethnicity, Insurgency, and Civil War.” American Political Science Review97 (1): 75–90.
43.
FismanRaymond. 2001. “Estimating the Value of Political Connections.” The American Economic Review91 (4): 1095–1102.
44.
FriedenJeffry A.1994. “International Investment and Colonial Control: A New Interpretation.” International Organization48 (4): 559–93.
45.
GarrigaAna Carolina2002. “Central Banks and Civil War Termination.” Journal of Peace Research59 (4): 508–525.
46.
GeddesBarbara. 1994. Politician's Dilemma: Building State Capacity in Latin America. University of California Press.
47.
GleditschNils PetterWallensteenPeterErikssonMikaelSollenbergMargaretaStrandHåvard. 2002. “Armed Conflict 1946-2001: A New Dataset.” Journal of Peace Research39 (5): 615–637.
48.
GoemansHeinGleditschKristian SkredeChiozzaGiacomo. 2009. “Introducing Archigos: A Dataset of Political Leaders.” Journal of Peace Research46 (2): 269–283.
49.
GrahamBenjamin A. T.JohnstonNoel P.KingsleyAllison F.. 2018. “Even Constrained Governments Take: The Domestic Politics of Transfer and Expropriation Risks.” Journal of Conflict Resolution62 (8): 1784–1813.
50.
GurievSergeiKolotilinAntonSoninKonstantin. 2011. “Determinants of Nationalization in the Oil Sector: A Theory and Evidence From Panel Data.” Journal of Law, Economics, and Organization27 (2): 301–323.
51.
GurrTed. 1968. “A Causal Model of Civil Strife: A Comparative Analysis Using New Indices.” American Political Science Review62 (4): 1104–1124.
52.
HaassFelix. 2021. “Insurgency and Ivory: The Territorial Origins of Illicit Resource Extraction in Civil Conflicts.” Comparative Political Studies54 (8): 1321–1361.
53.
HajzlerChristopher. 2012. “Expropriation of Foreign Direct Investment: Sectoral Patterns From 1993 to 2006.” Review of World Economics/Weltwirtschaftliches Archive148 (1): 119–149.
54.
HajzlerChristopherRosboroughJonathan. 2016. Government Corruption and Foreign Direct Investment Under the Threat of Expropriation. Staff Working Papers 16-13. Bank of Canada.
55.
HansenKenneth W.2005. “Tales from the Dark Side: Lessons Learned From Troubled Investments.” In International Political Risk Management: Looking to the Future, edited by GeraldT. WestMoranTheodore H., 12–29. World Bank.
56.
HartleyK.SandlerT.. 1995. Handbook of Defense Economics: Defense in a Globalized World. Elsevier.
57.
HeniszWitold J.2000. “The Institutional Environment for Multilateral Investment.” Journal of Law, Economics, and Organization16 (2): 334–364.
58.
ICSID.2006. Decision on the Application for Annulment of the Award. ICSID Case No. ARB/99/7. International Centre for Settlement of Investment Disputes. November 1. https://www.italaw.com/cases/709.
Institut d'études internationales deMontréal.2000. Mining Investment in Areas of Conflict: The Case of the Democratic Republic of Congo (DRC). Université du Québec à Montréal. https://www.ieim.uqam.ca/IMG/pdf/appendix2.pdf. AccessedDecember 9, 2025.
JensenNathan. 2003. “Democratic Governance and Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment.” International Organization57 (3): 587–616.
63.
JensenNathan M.2006. Nation-States and the Multinational Corporation: A Political Economy of Foreign Direct Investment. Princeton University Press.
64.
JensenNathan M.2008. “Political Risk, Democratic Institutions, and Foreign Direct Investment.” The Journal of Politics70 (4): 1040–1052.
65.
JensenNathan M.JohnstonNoel P.LeeChia-yiSahinHadi. 2020. “Crisis and Contract Breach: the Domestic and International Determinants of Expropriation.” The Review of International Organizations15 (4): 869–898.
66.
JodiceDavid A.1980. “Sources of Change in Third World Regimes for Foreign Direct Investment, 1968–1976.” International Organization34 (2): 177–206.
67.
JudStefanoReiterDan. 2023. “Populism, Party Ideology, and Economic Expropriations.” International Interactions49 (6): 904–934.
68.
KernerAndrewPelcKrzysztof J.. 2022. “Do Investor–State Disputes (Still) Harm FDI?” British Journal of Political Science52 (2): 781–804.
69.
KimDongkyuBakDaeheeLeeHoon. 2019. “Conflict and the Expropriation of Foreign Firms.” Presented at the Annual Convention of International Studies Association. Unpublished.
70.
KlosekKamil C.2020. “Military Interventions in Civil Wars: Protecting Foreign Direct Investments and the Defensee Industry.” Civil Wars22 (1): 87–113.
71.
KobrinStephen J.1980. “Foreign Enterprise and Forced Divestment in LDCs.” International Organization34 (1): 65–88.
72.
KobrinStephen J.1984. “Expropriation as an Attempt to Control Foreign Firms in LDCs: Trends From 1960 to 1979.” International Studies Quarterly28: 329–348.
73.
KobrinStephen J.1987. “Testing the Bargaining Hypothesis in the Manufacturing Sector in Developing Countries.” International Organization41: 609–38.
74.
Latin American Studies Association. 1990. Electoral Democracy Under International Pressure: The Report of the Latin American Studies Association Commission to Observe the 1990 Nicaraguan Election, March 15, 1990. Latin American Studies Association. https://www.williamgbecker.com/lasa1990report.pdf
75.
Le BillonPhilippe. 2001. “The Political Ecology of War: Natural Resources and Armed Conflicts.” Political Geography20 (5): 561–584.
76.
LeeHoon. 2017. “Does Armed Conflict Reduce Foreign Direct Investment in the Petroleum Sector?” Foreign Policy Analysis13 (1): 188–214.
77.
LeeHoonLektzianDavidBiglaiserGlen. 2023. “The Effects of Economic Sanctions on Foreign Asset Expropriation.” Journal of Conflict Resolution67 (2-3): 266–296.
78.
LeeHoonBakDaeheeLeeKyu YoungKimDongkyu. 2026. “Replication Data for: Intrastate Conflict, War Finance, and the Expropriation of Foreign Firms”, https://doi.org/10.7910/DVN/Y5HMC6
79.
LiQuan. 2006. “Political Violence and Foreign Direct Investment.” In Research in Global Strategic Management, edited by FratianniM.RugmanA. M., 225–249. Elsevier.
80.
LiQuan. 2009. “Democracy, Autocracy, and Expropriation of Foreign Direct Investment.” Comparative Political Studies42 (8): 1098–1127.
81.
LiQuanResnickAdam. 2003. “Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries.” International Organization57 (1): 175–211.
82.
LiQuanVashchilkoTatiana. 2010. “Dyadic Military Conflict, Security Alliances, and Bilateral FDI Flows.” Journal of International Business Studies41: 765–782.
83.
LipsonCharles. 1985. Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries. University of California Press.
84.
LujalaPäiviGleditschNils PetterGilmoreElisabeth. 2005. “A Diamond Curse? Civil War and A Lootable Resource.” Journal of Conflict Resolution49 (4): 538–562.
85.
MacCullochRobert. 2004. “The Impact of Income on the Taste for Revolt.” American Journal of Political Science48 (4): 830–848.
86.
MbayeSambaMoreno BadiaMarialuzChaeKyungla. 2018. “Global Debt Database: Methodology and Sources.” IMF Working Paper WP/18/11.
87.
MedinaLuis FernandoBucheliMarceloKimMinyoung. 2019. “Good Friends in High Places: Politico-Economic Determinants of the Expropriation and Taxation of Multinational Firms.” Journal of International Business Policy2 (2): 119–141.
88.
MerrillTim L.1994. Nicaragua: A Country Study. Federal Research Division, Library of Congress: For sale by the Supt. of Docs. U.S. G.P.O. [Pdf] Retrieved from the Library of Congress. https://www.loc.gov/item/94021664/
89.
MinorMichael S.1993. “Reassessing the Link Between Political Stability and Expropriation Propensity.” Transnational Corporations2 (2): 87–98.
90.
MinorMichael S.1994. “The Demise of Expropriation as an Instrument of LDC Policy, 1980–1992.” Journal of International Business Studies25 (1): 177–188.
91.
MosleyLayna. 2003. Global Capital and National Governments. Cambridge University Press.
92.
NestMichaelGrignonFrançoisKisanganiEmizet F.. 2006. The Democratic Republic of Congo: Economic Dimensions of War and Peace. Lynne Rienner Publishers, Inc.
93.
OatleyThomas. 2010. “Political Institutions and Foreign Debt in the Developing World.” International Studies Quarterly54 (1): 175–195.
94.
OcampoJ. A.1991. “Collapse and (Incomplete) Stabilization of the Nicaraguan Economy.” In The Macroeconomics of Populism in Latin America, edited by DornbuschRudigerEdwardsSebastian, 331–361. University of Chicago Press. https://www.nber.org/system/files/chapters/c8304/c8304.pdf
95.
OsgoodIainSimonelliCorina. 2020. “Nowhere to Go: FDI, Terror, and Market-specific Assets.” Journal of Conflict Resolution64 (9): 1584–1611.
96.
PanizzaUgoSturzeneggerFedericoZettelmeyerJeromin. 2009. “The Economics and Law of Sovereign Debt and Default.” Journal of Economic Literature47 (3): 651–698.
97.
PelcKrzysztof J.2017. “What Explains the Low Success Rate of Investor-State Disputes?” International Organization71 (3): 559–583.
PintoPablo M.ZhuBoliang. 2022. “Brewing Violence: Foreign Investment and Civil Conflict.” Journal of Conflict Resolution66 (6): 1010–1036.
100.
PoastPaul. 2015. “Central Banks at War.” International Organization69: 63–95.
101.
PoastPaul. 2019. Arguing About Alliances: The Art of Agreement in Military-Pact Negotiations. Cornell University Press.
102.
PrzeworskiAdamAlvarezMichaelCheibubJosé A.Fernando LimongiF.. 2000. Democracy and Development: Political Institutions and Economic Performance, 1950-1990. Cambridge University Press.
103.
RaslerKaren A.ThompsonWilliam R.. 1985. “War Making and State Making: Governmental Expenditures, Tax Revenues, and Global Wars.” American Political Science Review79 (2): 491–507.
104.
ReganPatrick M.NortonDaniel. 2005. “Greed, Grievance, and Mobilization in Civil Wars.” Journal of Conflict Resolution49 (3): 319–336.
ScheveK.StasavageD.. 2012. “Democracy, War, and Wealth: Lessons From Two Centuries of Inheritance Taxation.” American Political Science Review106 (1): 81–102.
109.
SchnitzerMonika. 1999. “Expropriation and Control Rights: A Dynamic Model of Foreign Direct Investment.” International Journal of Industrial Organization17 (8): 1113–1137.
110.
SchultzKenneth AWeingastBarry R. 2003. “The Democratic Advantage: Institutional Foundations of Financial Power in International Competition.” International Organization57 (1): 3–42.
111.
SeldenZachary. 1999. Economic Sanctions as Instruments of American Foreign Policy. Praeger.
112.
SheaPatrick E.2014. “Financing Victory Sovereign Credit, Democracy, and War.” Journal of Conflict Resolution58 (5): 771–95.
113.
SheaPatrickPoastPaul. 2020. “Leaders and Default.” International Studies Quarterly64 (2): 406–418.
114.
SheaPatrick E.SolisJonathan A.. 2017. “Leaders, Tenure, and the Politics of Sovereign Credit.” International Interactions44 (2): 294–320.
115.
SimmonsBeth A.2000. “International Law and State Behavior: Commitment and Compliance in International Monetary Affairs.” American Political Science Review94 (4): 819–835.
116.
SingerJ. DavidBremerStuartStuckeyJohn. 1972. “Capability Distribution, Uncertainty, and Major Power War, 1820-1965.” In Peace, War, and Numbers, edited by RussettBruce, 19–48. Sage.
117.
SlantchevBranislav L.2012. “Borrowed Power: Debt Finance and the Resort to Arms.” American Political Science Review106 (4): 787–809.
118.
SmithBenjamin. 2017. “Resource Wealth as Rent Leverage: Rethinking the Oil-Stability Nexus.” Conflict Management and Peace Science34 (6): 597–617.
119.
SnyderRichard. 2006. “Does Lootable Wealth Breed Disorder? A Political Economy of Extraction Framework.” Comparative Political Studies39 (8): 943–968.
120.
SnyderRichardBhavnaniRavi. 2005. “Diamonds, Blood, and Taxes: A Revenue-centered Framework for Explaining Political Order.” Journal of Conflict Resolution49 (4): 563–97.
121.
SpaldingRose J.1994. Capitalists and Revolution in Nicaragua: Opposition and Accommodation, 1979–1993. University of North Carolina Press.
122.
StiglitzJoseph E.BilmesLinda J.. 2008. The Three Trillion Dollar War: The True Cost of the Iraq Conflict. WW Norton & Company.
123.
TaydasZeynepPeksenDursun. 2012. “Can States Buy Peace? Social Welfare Spending and Civil Conflicts.” Journal of Peace Research49 (2): 273–287.
124.
ThiesCameron G.2010. “Of Rulers, Rebels, and Revenue: State Capacity, Civil War Onset, and Primary Commodities.” Journal of Peace Research47 (3): 321–332.
125.
ThyneClayton L.2006. “ABC’s, 123’s, and the Golden Rule: The Pacifying Effect of Education on Civil War, 1980–1999.” International Studies Quarterly50: 733–754.
WellhausenRachel L.2015. “Bondholders vs. Direct Investors? Competing Responses to Expropriation.” International Studies Quarterly59 (4): 750–764.
131.
WellhausenRachel L.2019. “International Investment Law and Foreign Direct Reinvestment.” International Organization73 (4): 839–858.
132.
WibbelsErik. 2006. “Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World.” International Organization60: 433–468.
133.
WilsonMatthew C.WrightJoseph. 2017. “Autocratic Legislatures and Expropriation Risk.” British Journal of Political Science47 (1): 1–17.
134.
World Bank. 2010. Global Development Finance 2010: External Debt of Developing Countries. World Bank.
