Divesting Under Pressure: U.S. Firms' Exit in Response to Russia's War Against Ukraine

29 Pages Posted: 23 May 2022

See all articles by Tetyana Balyuk

Tetyana Balyuk

Emory University - Goizueta Business School

Anastassia Fedyk

University of California, Berkeley - Haas School of Business

Date Written: April 29, 2022

Abstract

We explore the determinants and consequences of U.S. corporations limiting their business operations in Russia in the immediate aftermath of the 2022 Russian invasion of Ukraine. Firms with Russian exposure experience slightly worse stock market returns when the invasion begins on February 24, 2022. Russia-exposed firms with the worst stock-price reactions to the war are more likely to subsequently withdraw or suspend their Russian operations, whereas firms that experience mild initial effects are more likely to remain. When U.S. firms announce exits from Russia in the aftermath of the invasion, there are no adverse announcement effects on their returns. Instead, exit announcements are preceded by a negative trend in abnormal returns that ends immediately on the day after the announcement. In regression analyses, immediately-preceding negative stock returns are the strongest predictor of firms' decisions to exit Russia. These results are consistent with firms choosing to limit their Russian presence in response to operational impact and reputational effects, and the damage to stock returns stops immediately after the exit announcements.

Suggested Citation

Balyuk, Tetyana and Fedyk, Anastassia, Divesting Under Pressure: U.S. Firms' Exit in Response to Russia's War Against Ukraine (April 29, 2022). Available at SSRN: https://ssrn.com/abstract=4097225 or http://dx.doi.org/10.2139/ssrn.4097225

Tetyana Balyuk (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Anastassia Fedyk

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

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