Valuation of European firms during the Russia-Ukraine war

Alexandros Bougias, Athanasios Episcopos and George Leledakis

MPRA Paper from University Library of Munich, Germany

Abstract: We infer the asset value dynamics of European firms during the Russia-Ukraine war via the structural model of Merton (1974). Using high-frequency stock price data, we find that the war led to lower corporate security prices and higher asset volatility, eventually shifting asset values closer to the default region. On average, the balance sheet of European firms is expected to shrink by 2.05% and their 1-year default probability to increase from 0.32% to 2.12%. Regression analysis on asset and equity returns as well as default probability changes suggests that these effects are stronger for firms with large revenue exposure to Russia.

Keywords: European firms; Merton model; Russia-Ukraine war; Asset returns; Default risk (search for similar items in EconPapers)
JEL-codes: G12 G14 G32 (search for similar items in EconPapers)
Date: 2022-07-16
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-cis, nep-rmg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Valuation of European firms during the Russia–Ukraine war (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:113791

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