data on “raider” attacks from the Center for Public Procedures “Business Against Corruption”. The latter also allows us to make an important empirical contribution to the literatures on state-sponsored violence and property rights. Because raider attacks in Russia are typically tied to real violations of the law, which are then used by the state to expropriate assets in support of private interests; it is difficult to disentangle state-abetted violence from typical law enforcement practices. Existing studies have consequently been limited to surveys of the perceptions of firm managers and qualitative work. Our data from “Business Against Corruption” consists of actual reported instances of violence against firms subjected to multiple reviews to insure it reflects real stateabetted violence against firms (see Section IV). As such, we are among the first to study state-abetted violence and investment in Russia using objective data.

Substantively, our paper can provide important guidance to policy makers looking to improve their area’s business climate and investment levels. Limited time, resources, and political capital often mean that politicians face real trade-offs when making regulatory reforms. This paper intends to provide valuable insights into the importance of lowering overall regulatory barriers versus improving the consistency of regulatory enforcement that should make this trade-off easier to navigate.

We should note at the outset that this paper is an exploratory exercise. Our goal is not necessarily to produce strong causal claims, but to validate whether there is a relationship between our proxies for uncertainty in regulatory enforcement – variation in corruption and inconsistency in property rights enforcement – and investment behavior. We leave a more causally rigorous empirical design for future iterations of this paper. Nonetheless, our results do indicate strong (and negative) correlations between these proxies of uncertainty in regulatory enforcement and the willingness of firms to invest in Russia. Despite our inability to argue strongly for causation, we believe that these correlations are interesting in and of themselves given the relative paucity of tests of the effect of uncertainty in informal practices related to regulation on investment. To our knowledge only Malesky and Samphantharak (2008) and Wei (1997) provide micro-level tests of the effect of variation in corruption on investment. We are aware of no micro-level studies using actual data on state-abetted hostile take-overs and violence against firms to explore investment decisions.

The next section presents an overview of the literature. Section III provides some context for our study by summarizing contemporary Russian business and institutional environments. Section IV discusses the data, presents and operationalizes our hypotheses, and presents our estimation strategy. Section V presents our regression results and section VI concludes with a brief discussion of policy implications and issues for further research.

# **II. LITERATURE REVIEW**

Regulation influences all aspects of firm behavior, including the ability of firms to enter into new markets, exit old ones, interact with customers, and allocate capital and labor. Traditional work on regulation and investment has argued that compliance imposes transaction costs on firms, which negatively affect factor accumulation, profits, and productivity (c.f. Cooper and Haltiwanger 2006, Cooper and Willis 2003, Bentolila and Bertola 1990, Joyanovich 1982, Hopenhayen 1992, Erickson and Pakes 1998). Simply put, the more excessive are regulatory burdens and the more invasive procedures tied to them, the greater transaction costs incurred by firms. This in turn directly impacts the returns firms can expect from their investments, making them less likely to invest. Empirically, recent work has found links between regulation and investment that suggest that excessive regulation indeed depresses investment (Eifert 2009; Besley and Burgess 2004) and 4