The Impact of the War in Ukraine on Energy Prices: Consequences for Firms’ Financial Performance

Abstract

We analyze the impact of the shock to energy prices induced by the war in Ukraine on the financial performance of the major European firms listed in the Eurostoxx 600 index. We find that equity returns (CDS spread) decreased (increased) more substantially for firms characterized by high energy intensity and carbon emission intensity. We then perform a VAR-based exercise to produce forecasts of firms’ CDS spread conditional on the sustained level of electricity prices recorded in July 2022 and we document a sizable increase in the amount of firms with a CDS-implied non-investment rating.

Keywords: war in Ukraine; energy impacts; financial performance; CDS

JEL Classification: G12; G14; G32; G33