Economic Actors as Human Rights Watchers: The Effects of Government Sexual Violence on Foreign Direct Investment

Abstract

Do reports of sexual violence by state forces influence foreign direct investment? While studies have examined the impact of government human rights performance on FDI, how investors react to civilian victimization during wartime remains understudied. We investigate this with a focus on conflict-related sexual violence (CRSV). We argue that sexual violence by state governments results in the loss of FDI during conflict due to reputational and economic costs faced by foreign investors. With increasing international developments on CRSV, ties to governments that perpetrate sexual violence can be harmful to how the global community perceives foreign corporations. Moreover, government sexual violence signals that the government is relatively weaker than its opponent, creating uncertainties for foreign corporations regarding future investment opportunities in the host state. Analyzing sexual violence by government forces for all civil conflicts from 1989 to 2008, our findings show a decline in FDI as government sexual violence increases.