Market reaction to the Russian Ukrainian war: a global analysis of the banking industry

Abstract

Purpose The purpose of this paper is to study the market reactions of the banking industry to the Russian–Ukraine war. Design/methodology/approach This paper uses an event study methodology, regression analyses and interaction effects to study the effect of the war on banks stock prices and analyze factors that explain the cumulative abnormal return. Findings First, this study finds a significant decline of almost 1.5% in return on the war date. Similar patterns were observed for all continents, but Europe had the most severe drop of about 4%. Second, after excluding the contemporaneous influence of the whole market using the market model, global bank equities returns fell by about 1% on the war date, indicating that bank stocks were more severely impacted by the war than the average stock market. Net-of-market return approach further reveals that bank stock prices decreased 1.4% more on the event day compared to the prewar market average. Third, the impacts of the war and sanctions were persistent when the war continued. Banks stocks were most hit in Europe, Asia and North America. Originality/value This paper pioneers the study of the effect of the Russia–Ukraine war on the banking industry. This paper also analyzes the reaction pattern of bank stocks before, during and after the war to explain the behavior and expectations of investors toward the war.

The impact of the Russia-Ukraine conflict on the Saudi Arabian stock market: An event study analysis

“…Finally, the Diversified Financial sector in Saudi Arabia displayed an increase in mean during the Event Window, indicating a positive impact. This result corresponds with the findings of Boubaker et al (2023) regarding the global banking industry. It underscores the importance of financial institutions in mitigating the impact of geopolitical risks.…”

“…In sectoral analyses, Yudaruddin et al (2023) and Amelya (2022), delved into sector-specific impacts, studying the consumer staples sectors and the oil and gas stocks, respectively, elucidating the differential impacts on distinct industrial sectors. Similarly, Boubaker, Nguyen, Trinh, and Vu (2023) and Martins, Correia, and Gouveia (2023) embarked on a specialized exploration of the banking industry and European banks, showcasing the vulnerability and the market reactions specific to the banking sector in the wake of geopolitical strife.…”

“…References like Ahmed et al (2023) and Boubaker et al (2023) have highlighted the use of t-statistics in event studies to determine the significance of market reactions to geopolitical events. In this study, t -statistics were computed for each sector and window to assess whether the abnormal returns were statistically different from zero.…”

Estimating the impact of the outbreak of wars on financial assets: Evidence from Russia-Ukraine conflict

“…The DID model is applied only to the Russia-Ukraine conflict because it is the most recent war among the above three wars and thus has the most influence at present. The Russia-Ukraine conflict has attracted much research interests up to now [ 27 , 28 , 30 , 31 ]. Also, it is considered more intelligible when the interpretation of results is focused on one specific war.…”

“…They found negative cumulative abnormal returns among global stock market indices. In the subsequent work, Boubaker et al [ 28 ] found a significant decline in returns of banks stock prices. Chortane and Pandey [ 29 ] found that a negative impact on the global currencies was brought about by the Russia-Ukraine conflict.…”