Geopolitical Shocks and Firm Valuation - Evidence from Nordic Listed Firms Exposed to Invasion of Ukraine 2022

Sammanfattning

This thesis examines how Russia’s 2022 invasion of Ukraine affected the stock market valuation of 172 Nordic listed firms with verified operational exposure to Russia, Belarus, and Ukraine. Using a nearest neighbour matched Difference-in-Differences framework combined with an event study approach, the analysis estimates both average and dynamic effects on abnormal returns over the period 2019–2023, with particular emphasis on the first 60 trading days following the invasion. The results show limited and specification-sensitive effects on daily abnormal returns, indicating that markets did not immediately incorporate firm-level geopolitical exposure. However, cumulative abnormal returns reveal a statistically significant and economically meaningful negative valuation effect that develops gradually over time. Within 60 trading days, exposed firms experience cumulative abnormal returns of approximately −12.5%, corresponding to an estimated market capitalisation loss exceeding USD 110 billion. The analysis further reveal substantial sectoral heterogeneity. Industrial firms experience the strongest and most persistent negative effects, with cumulative abnormal returns reaching roughly −15%, while Non-Industrial firms exhibit weaker and less robust responses. Robustness checks excluding sectors exposed to non-market-neutral shocks, including Defence, Energy, Aviation, and Digital Platforms, confirm the overall pattern of negative cumulative returns. Overall, the findings suggest that geopolitical exposure constitutes a delayed but economically significant risk factor in equity markets, with valuation effects depending strongly on firms’ operational structure.