The Reaction of Russian Public Companies’ Stock Prices to Sanctions Against Russia

Journal of Corporate Finance Research, Vol. 12, No. 3, pp. 27-38, 2018

12 Pages Posted: 3 Apr 2019

See all articles by Iuliia Naidenova

Iuliia Naidenova

National Research University Higher School of Economics

Anastasia Novikova

Independent

Date Written: 2018

Abstract

The imposition of sanctions by foreign countries against Russia since 2014 and their prolongation for the following several years resulted in significant changes in Russian economics. In the first instance, economic sanctions were aimed towards the weakening of companies by banning exports and imports of certain goods, closeout or suspension of joint venture projects, as well as limiting the provision of financing. However, one can postulate that these sanctions influenced the companies to different extents. This research offers an analysis of the changes in share prices of Russian public companies of the MICEX index in response to sanctions against Russia in 2014–2016. The research methodology is based on the event study approach, which allows estimation of a short-term response of the shares’ prices to information release. The results of this paper confirm that imposition and prolongation of sanctions resulted in a significant fall in share prices. With an average daily return on shares of the Russian stock market companies of 0.1%, a fall in return of 0.17% points per day as a result of the imposition of sanctions by the USA is economically significant. Apart from that, the sanctions influenced financially dependent companies to a greater extent. Contrary to theoretical assumptions of a greater influence of sanctions imposed by the countries with which a more close economic cooperation had been established, it transpired that the imposition of sanctions by the USA resulted in the greatest fall in prices for shares. Also, an important result indicated in this paper is the fact that imposition of targeted sanctions against certain companies has not entailed a greater impact of the sanctions on such companies. This is indicative of the ineffectiveness of targeted sanctions imposed on Russia. The influence of the government share in ownership of companies and the differences of response of the shares’ prices depending on the company industry sector have not been confirmed.

Keywords: sanctions, Russia, stock market, public companies, event study, abnormal return

JEL Classification: G14, F51, G3

Suggested Citation

Naidenova, Iuliia and Novikova, Anastasia, The Reaction of Russian Public Companies’ Stock Prices to Sanctions Against Russia (2018). Journal of Corporate Finance Research, Vol. 12, No. 3, pp. 27-38, 2018. Available at SSRN: https://ssrn.com/abstract=3346340

Iuliia Naidenova (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Anastasia Novikova

Independent ( email )

No Address Available

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