What makes firms vulnerable to the Russia-Ukraine crisis?

Purpose This study examines the impact of the Russia-Ukraine war on the constituent firms of the leading stock market indices of the G7 countries to provide insights into the vulnerability of firms to war events. Design/methodology/approach This study employs the event study method on a sample of 531 firms covering the period from 02 March 2021 to 08 March 2022 and conducts a cross-sectional analysis of cumulative abnormal returns and country- and firm-specific variables. Findings Risk exposure and trade dependence trigger invasion-generated negative abnormal returns. The authors demonstrate that stock prices are fragile to geopolitical risks and trade dependence. Consistent with previous literature, the authors find evidence of a size anomaly and high risk associated with a higher book-to-market ratio. Research limitations/implications This study has implications for policymakers identifying the firm-specific variables driving event-induced returns. While providing insights into the geographical diversification of funds, this study shows the heterogeneous characteristics of firms operating in these countries. Originality/value Previous studies on the Russia-Ukraine war have been limited to analyzing the behavior of leading stock market indices without examining firm-level variations triggered by the war. This study fills this gap and contributes to the growing literature on the Russia-Ukraine crisis in two ways: first, it provides firm-level evidence from the G7 countries in addition to how global stock market indices have reacted to the invasion and second, it uses cross-sectional analysis to provide evidence of the characteristics that make firms resilient to wars.