The impact of geopolitical crisis on defense and aerospace stock performance: evidence from the Russia–Ukraine war

Adnan Atm, Md Tapan Mahmud and Abdullah Al Mamun

Accounting Research Journal, 2026, vol. 39, issue 1, 122-145

Abstract: PurposeThis study aims to observe the effects of the Russia–Ukraine war on investors’ attitudes toward defense and aerospace firms by analyzing how stock performance is shaped by geopolitical alignment (NATO membership), firm size and national economic ties to Russia.MethodologyAdopting an event study methodology on a sample of 370 defense and aerospace firms’ daily returns from 17 countries during a 7-day event window, average abnormal returns (AAR) and cumulative AAR (CAAR) were computed and analyzed using a combination of robust parametric and non-parametric statistical tests.FindingsThe research outcomes show highly positive abnormal returns for most defense and aerospace firms in the aftermath of the invasion, suggesting positive investors’ anticipations of military spending. However, these reactions differed among countries and firm groups. Firms from NATO countries demonstrated higher and more sustained positive responses than those from non-NATO countries. Larger firms (mid, large and mega cap) consistently exhibited higher positive CAAR. Moreover, firms of countries with close economic ties with Russia showed more pronounced fluctuations in AAR and CAAR, indicating increased risk perception on the part of investors.Originality/valueThe primary contribution of this paper is to demonstrate that the market’s response to a major geopolitical conflict is not monolithic but is a complex interplay of firm-level characteristics and national-level exposures. These findings provide a nuanced understanding of risk and resilience in a critical sector, offering valuable insights for investors and policymakers on how geopolitical factors are priced in capital markets.

Keywords: Geopolitical risk; Event study; Defense and aerospace sector; Abnormal returns; Russia–Ukraine war (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-05-2025-0176

DOI: 10.1108/ARJ-05-2025-0176

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