If postcolonial states aim to create a low-risk image of themselves by democratizing in order to attract foreign direct investment, it is important to identify the democratic attributes that enable an attractive investment environment. Through an empirical analysis of all members of the United Nations, and a case study analysis of the Gulf Cooperation Council member states, this research demonstrates that democracy that emphasizes respect for civil liberties reduces country risk in all states, including postcolonial states, while democracy that emphasizes form over substance has a weaker effect in postcolonial states. This research contributes to the literature on economic development by highlighting how different conceptualizations of democracy weigh on country risk in the postcolonial context.