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Mayday! Mayday! The airlines stock returns are failing. Analysis of the impact of Russia–Ukraine war

Mayday! Mayday! The airlines stock returns are failing. Analysis of the impact of Russia–Ukraine war This paper investigates the short-term market impact of the beginning of the military conflict between Russia and Ukraine (February 24, 2022) on a set of airline stocks listed.Design/methodology/approachThis study uses an event study methodology, cross-section analyses and interaction effects to study the effect of the war on airline stock prices and firm-specific characteristics that explain the cumulative abnormal return.FindingsThe authors observe a negative and statistically significant stock price reaction at and around the beginning of the military conflict between Russia and Ukraine, for 74 listed airlines. These results are consistent with investment portfolio rebalancing and asset pricing perspective. Moreover, this study's results show a higher negative stock market reaction for airlines based in Europe. Empirical evidence suggests the existence of a “proximity penalty” for European companies. Finally, this study's results provide insights into which airline-specific characteristics emerge as value drivers. Larger, well-capitalized (high liquidity and low debt) and profitable airlines firms with less institutional ownership have superior stock market returns and show more able to handle with the losses resulting from the war.Originality/valueThis paper fills a gap in the literature about the impact of the Russia–Ukraine war on the airline industry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Mayday! Mayday! The airlines stock returns are failing. Analysis of the impact of Russia–Ukraine war

Martins, António Miguel; Cró, Susana
Journal of Economic Studies , Volume 51 (6): 17 – Aug 13, 2024
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References (59)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0144-3585
DOI
10.1108/jes-08-2023-0390
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the short-term market impact of the beginning of the military conflict between Russia and Ukraine (February 24, 2022) on a set of airline stocks listed.Design/methodology/approachThis study uses an event study methodology, cross-section analyses and interaction effects to study the effect of the war on airline stock prices and firm-specific characteristics that explain the cumulative abnormal return.FindingsThe authors observe a negative and statistically significant stock price reaction at and around the beginning of the military conflict between Russia and Ukraine, for 74 listed airlines. These results are consistent with investment portfolio rebalancing and asset pricing perspective. Moreover, this study's results show a higher negative stock market reaction for airlines based in Europe. Empirical evidence suggests the existence of a “proximity penalty” for European companies. Finally, this study's results provide insights into which airline-specific characteristics emerge as value drivers. Larger, well-capitalized (high liquidity and low debt) and profitable airlines firms with less institutional ownership have superior stock market returns and show more able to handle with the losses resulting from the war.Originality/valueThis paper fills a gap in the literature about the impact of the Russia–Ukraine war on the airline industry.

Journal

Journal of Economic Studies – Emerald Publishing

Published: Aug 13, 2024

Keywords: War; Airlines; Stock returns; Event study

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