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The effects of the Russia-Ukraine war and the Wagner Group coup on defense stocks in Europe : an event study analysis

Covachev, Svetoslav and Fazakas, Gergely (2024) The effects of the Russia-Ukraine war and the Wagner Group coup on defense stocks in Europe : an event study analysis. Studies in Economics and Finance . DOI 10.1108/SEF-11-2023-0675

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Official URL: https://doi.org/10.1108/SEF-11-2023-0675


Abstract

Purpose– This study aims to examine the impact of the beginning of the Russia–Ukraine war and the Wagner Group's attempted military coup against Putin’s regime on the European defense sector, consisting of weapons manufacturers. Design/methodology/approach – The authors use the event study methodology to quantify the impact. That is, the authors assume that markets are efficient, and abnormal stock returns around the event dates capture the magnitudes of the impacts of the two events studied on European defense sector companies. The authors use the capital asset pricing model and two different multifactor models to estimate expected stock returns, which serve as the benchmark necessary to obtain abnormal returns. Findings – The start of the war on February 24, 2022, when the Russian forces invaded Ukraine, was followed by high positive abnormal returns of up to 12% in the next few days. The results are particularly strong if multiple factors are used to control for the risk of the defense stocks. Conversely, the authors find a negative impact of the rebellion initiated by the mercenary Wagner Group's chief, Yevgeny Prigozhin, on June 23, 2023, on the abnormal returns of defense industry stocks on the first trading day after the event. Originality/value– To the best of the authors’ knowledge, this is the first study of the impact of the Russia–Ukraine war on the defense sector. Furthermore, this is the first study to measure the financial implications of the military coup initiated by the Wagner Group. The findings contribute to a rapidly growing literature on the financial implications of military conflicts around the world.

Item Type:Article
Uncontrolled Keywords:equity; Event study; civil war; Russia-Ukraine war; Defense sector;
Divisions:Institute of Finance
Subjects:Political science
DOI:10.1108/SEF-11-2023-0675
ID Code:9902
Deposited By: MTMT SWORD
Deposited On:06 May 2024 14:14
Last Modified:06 May 2024 14:14

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