Does Resource Nationalism Restrain Corporate Investment? Evidence from Indonesia’s Nickel Downstreaming Policy

This paper investigates the microeconomic consequences of contemporary resource nationalism by evaluating Indonesia’s 2020 prohibition on raw nickel exports. While state-mandated downstreaming aims to capture domestic industrial rents, it imposes severe adjustment frictions on incumbent extractors. Using a Difference-in-Differences framework on a panel of publicly listed mining corporations from 2017 to 2026, we estimate the causal impact of forced vertical integration on firm valuation, equity market returns, and capital deployment. We address the small-cluster inferential challenges typical in extractive capital markets by employing dynamic event-study specifications, temporal placebos, and wild cluster bootstrap resampling. Contrary to polarized narratives predicting either sector-wide value destruction or immediate speculative windfalls, aggregate firm valuation (Tobin’s Q) remained statistically invariant to the regulatory shock. While pure-play nickel extractors initially exhibited a secondary market premium, this effect dissipated entirely under robust finite-sample corrections. The primary empirical legacy of the mandate centers on corporate investment. The evidence suggests a structural reduction in physical capital expenditure among nickel-exposed firms, as entities engaged in acute capital rationing to accommodate the massive financing requirements of mandated smelter construction, effectively restraining conventional upstream investment.