From Russia With... Loss? How the war in Ukraine and the sanctions against Russia are impacting the companies with the largest exposure to Russia.

The Russian invasion of Ukraine on 24th February 2022 has prompted many international companies to reduce their operations with Russia or to leave the country as a sign of their opposition to the war. This paper explores the consequences of this conflict on the companies with the largest exposure to Russian operations, by investigating how the radical or nuanced decision to stay or leave Russia influences the way in which these companies are affected by the war. The sample is composed of 215 companies from all the sectors and located in the emerging markets and developed markets, the latter including for this work North America, Europe and Japan. The impacts are studied quantitatively through an analysis of the observed returns of companies and the abnormal returns generated as a result of the war and computed using the Fama French Five-Factor Model. From the results of the developed markets, it has been shown that companies having decided to reduce, slightly or to a larger extent while not entirely, their operations with Russia are less impacted by the war than companies having radically decided to completely leave or stay in Russia. Furthermore, when comparing with each other companies having taken a radical decision towards Russia, or companies having taken a more nuanced position, the bigger the exposure to Russia, the bigger the impact. Finally, this paper explains that the decision to cut ties with Russia, either completely or partially, was driven by unexpected losses the companies faced directly after the outbreak of the war.