Firms entangled in geopolitical conflicts: Evidence from the Russia – Ukraine war

Tosun, Onur Kemal ORCID: https://orcid.org/0000-0003-2551-1408, Eshraghi, Arman ORCID: https://orcid.org/0000-0002-7406-1725 and Vigne, Samuel 2024. Firms entangled in geopolitical conflicts: Evidence from the Russia – Ukraine war. Journal of International Money and Finance 147 , 103137. 10.1016/j.jimonfin.2024.103137 Item availability restricted.

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Abstract

We examine the responses of US-based multinationals and subsequent financial market reactions to Russia’s invasion of Ukraine in February 2022. The firm-level decisions range from clean exits from the Russian market, all the way to ‘digging in’ as if the war never happened. Findings show that, in the short-term, markets favour ‘middle ground’ decisions which balance shareholder interests with regulatory and ethical concerns. This is manifest through those firms taking extreme decisions, on either end of the stay-or-leave spectrum, experiencing more negative returns. In the longer term, however, ethical concerns and other considerations dominate such that firms announcing clean breaks incur lower losses. In other words, sitting on the fence does not pay off for long. We also show interesting differences in investor reactions between two major non-US markets: China, a Russia-leaning country, vs India, a neutral country. While Indian investors behave similar to US investors, Chinese investors do not significantly punish firms that stay put in Russia. We re-examine the situation later and show that markets reward a Russia-opposing corporate position in the longer term.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0261-5606
Date of First Compliant Deposit:	5 July 2024
Date of Acceptance:	5 July 2024
Last Modified:	31 Jul 2024 16:34
URI:	https://orca.cardiff.ac.uk/id/eprint/170384

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