Determining the Impact of Terrorism on Foreign Direct Investment in Kenya

The association between terrorism and foreign direct investment in Kenya was examined in this paper. The analysis relied on secondary data on terrorist events and foreign direct investment from 2010 to 2012. The association between the research variables was tested using a multiple regression model. The study discovered that terrorism had a negative impact on FDI in Kenya using the model. Terrorism has a detrimental impact on FDI in Kenya, according to the findings. Terrorism undermines foreign investor trust, resulting in a drop in FDI. As a result, the study showed that when one investor is attacked, other investors are hesitant to participate in that economy, resulting in a negative spillover effect. Finally, the study found that political stability is an important driver of FDI. When there is a high level of terrorism, investors will be hesitant to invest in such economies. As a result, the null hypothesis that there is no link between terrorism and FDI was disproved.

These findings are consistent with those of a study presented at the Eight Young Economists Seminar (2013), which found that increasing the number of terrorist attacks against investors by one standard deviation reduces the flow of investment by 14 percent of the average FDI share in a host country’s GDP. In addition, the studies found that. Finally, the analysis found that perceived political stability was the most critical determinant for FDI in the previous 16 years at the time of the study. The findings are also reinforced by Shahbaz et al. [1], who conducted a study on the relationship between terrorism and foreign direct investment and discovered that as the number of terrorist incidents increased, foreign investors became less interested in investing in Pakistan.

Author(S) Details

Solomon Kinyanjui
Business Administration, School of Human Resource Development, Jomo Kenyatta University of Agriculture & Technology, Nairobi, Kenya.

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